Transcripts For CSPAN2 Wells Fargo CEO Testifies Before House Financial Services 20240713

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 and managing it in a very different way and in a very tight way just like you would manage any Significant Institution like wells fargo. I yield back. Thank you. The gentlewoman from new york miss vazquez is recognized for five minutes. Thank you madam chair. Mr. Scharf, i dont like being misled and i dont really like being lied to and last year but about the status of wells fargo and in the 2018 consent you responded to me by stating wells fargo had made the oversight into required benefit and we now know that it is not true. As the new ceo let me ask you, when do you expect wells fargo to be in compliance with the 2018 consent board. Congresswoman, i cant give you an answer to that today. Ultimately, when we believe were in compliance of whats important and not believe in wherein compliance. We have an enormous amount of resources working on this and are highly focused as a my but i cannot sit here today. Mr. Scharf including two correspondents wells fargo will meet plans to address Risk Management by april 30th 2020. Do you still expect a plan by april 2020 . Congresswoman, i cant answer that question today. Were focused on doing the work necessary as we review it and its in the condition the question is no. So, wells fargo has already submitted two plants that have been rejected by the fed and has numerous extensions. Why will they not meet this deadline . Do you think they have a right to know. This is your deadline by the way, sir. This is the wells fargo deadline. I understand why you feel the way you do but what i can tell you is what i discovered since i got to the company. My obligation is to we remove all the things necessary and be as honest as we can about what we can get done. Sir, as we have been discussing its the ceo to come before this committee and will far goes failure to comply with the feds 2018 derives from the culture in these profits instead of Risk Management and as a new ceo, how will you emphasize operational Risk Management at wells fargo . Congresswoman, i think its both of our words and our actions. I have said publicly, including on our First Investor call that this work will come ahead of Everything Else and the results may be hard. That is exactly what this committee expects from you. You said you set a deadline of april 2020. That is the type of action that we need. Our consumers that we use, of your consumers that were misled and charged excessive fees for accounts that they didnt sign up for. Yes, i agree with the Ranking Member that we should be concerned about the coronavirus and your workers. For that fact and for that matter workers across america. But you are responsible for the fact that to many consumers were overcharged for problems that they didnt sign up for. You are the third ceo so my question is is there anything else that might be coming to light in terms of wrongdoing . Congresswoman, not that im aware of. I could hear the answers that you have that we have to do far better than what weve done. Thank you for holding this hearing and for feeling our responsibility of oversight and i yield back. Thank you. Mr. For scharf, i would like you to be a specific as you can possibly be about what you are doing to correct what was done in what they are going to be repaid for it and the questions that will come back to you time and time again today. The gentleman from kentucky mr. Barr. Mr. Sharp if, right here and welcome back to the committee mr. Sharp if you are welcome to wells fargo but not new to the job in the Global Systemic Important Bank and recently left the position of chief executive are fiercer of another global systemically Important Bank and given your past experience running a large and global institution. Do you believe that wells fargo is too big to manage some of the colleagues are suggesting. No i dont congressman. What do you believe contributed whirls far go and past failures. Was it more the culture of the Management Structure that was used in place or do you believe it was the size of the institution. Theres no question in my mind that the culture and structure of the company. Because my friend from new york i have to ask that wells fargos policy on financing firearms had anything to do whatsoever on the aggressive shale sales practices and the opening of unauthorized accounts . Not at all to my knowledge. I will say as an editorial comment that if your bank allows politics to impact lending decisions it runs the risk of only distracting your bank from doing the things that they need to do to i will not. To take on the task at hand which is to reform the culture at the bank and to reform the Management Structure that you identified as the problem. Please, i urge you to resist a temptation to politicize lending and focus on the actual issues. Let me ask you, in the past wells fargo as a model in which Core Functions as Risk Management in business lines with lizzo visibility or capability to wells fargo and they identified in the republican published last week. The company has moved to build out an enterprise that your peers and they are a flatter organization. Yes. How will this flatter organizational structure and correct mistakes from the past . Congressman, its a combination of both of the things that you referred to. Theres no question that we need the independent control of infrastructure that does not accountable to any business and in the case of risk and in the board of directors. That group is independent and makes independent judgments and in combination with the Management Team or direct exposure to the issues because your people at the table talking about them. It allows us to be much more engaged with the independent control infrastructure at the same table and the ability to have this not become a problem. Wells fargo response to regulators left something to be desired and relate to complete and totally insufficient. We agree to that and further, the teams consent deliverables were shifted around the chart wells fargo and supporting the team suggesting a relative importance in the overall pecking order in a more hands oversight process and working with regulators in compliance and i think your testimony will take this as an urgent basis as your word. Would you describe the changes youre making to the Team Managing wells fargo response to these owners . We centralized the management of all of these orders under our chief operating officer who came in from the outside who has extensive experience in his prior role in the mid dealing with similar issues. Under him, we have an organization that is organized around the work thats got to get done. Centralized trucker is very different than we had in the past. I agree with you when you say our country and communities would benefit from this and i wish you all the best as you make these important changes to correct these failures from the past and i yield back. The gentleman from california is also the chair for the subcommittee and entrepreneurship in the Capital Markets is now recognized for five minutes. Ranking member and attacks the work of this committee, while at the same time saying its great that these two directors were forced to resign because they were highly embarrassing disclosures. The system does work. These highly embarrassing disclosures and did they arrive out of thin air . Were they presented to us by a god . No. These disclosures heroes because of the work of our chair, Maxine Waters and the chair of the subcommittee and the democratic staff. Had we continued the hear no evil, see no evil approach that this committee had in the prior congress these embarrassing disclosures would never have come out in these embarrassing Board Members would still be on your board. Were guard lists of the outbreak we cant allow the outrageous to blind us into the present and we have the coronavirus, people are afraid and the Economic System could get better and could get worse. Not only do we have a coronavirus we have a decline in oil prices that is shaking of the market, the fact we have two problems that doesnt unionized us from the third or fourth thing happening. Weve done a stress test to look at other things that could hit our economy. Youve got a plan in place six or seven months ago and will send 31. 4 billion dollars out of our cap to the stare holder shareholders. We dont know what the world will happen after this coronavirus. You are certainly too big to fail. Mr. Sharp will you say you will suspend stock buybacks until we know what this coronavirus is going to do the worlds economy and to the bank . Congressman, we do a stress test as you are aware. Which puts all of the banks im aware of that. But that stress test was for some other stress happening which could happen. You have to stress is already. Youve done a stress test but you havent done a stress test with the other calamity occurs in the middle of the coronavirus thats affecting the entire world. Youre stress tests we already have the stress and you havent done a double stress test. You are too big to fail, youve injured our economy by the d practices that were here to discuss with this committee. You want to do something good and commit to ending stock buybacks until we know what the coronavirus will do to your bank solvency. Yes or no . I have limited time, yes or no. We will run the bank the way we think is prudent with our regulators. In other words youre having dealt harshly with consumers and will do nothing to insulate our economy and our society from the possible. Meltdown of the thank. You ripped off consumers, they have the overdraft protection to protect consumers and we you have substantial lobbying power, brilliant lobbyists who are presented you. Will they be lobbying on the overdraft protection act . Do you want to be on the right side of history . I asked your predecessors predecessor almost a year ago today and we told your people this was coming. We announce two new accounts, one that has no overdraft protection i didnt ask that. You are repeating excuse me. Resigned predecessor said. Will you commit the lobbying power of your bank to work for the overdraft protection . I will commit that we will support the accounts we announced. That does not mean you will work for legislation designed to protect consumers from unreasonable overdraft protection or phony ordering of checks that clear a particular day to disadvantage the consumer . Finally, will you enforce the arbitration provisions in your contracts even as to the phony accounts where the consumer never signed them to the count . We were able to settle the practice matters what about the ones that are still pending . We will continue to pursue it but we will look at it. He will bar people from court. Thank you. The gentleman from missouri is recognized for five minutes. I want to spend some time with regards to the entry port republicans put together and get some give and take on this. This is the third report we have done since 2016 and half the documents were obtained by republicans as a result of the fact the Obama Administration wouldnt turn them over. The trumpet ministration is in charge of putting documents into other regulators that can have a better picture of what is going on here. One of the things that concerns me as a former regulator this is the first of three meetings but we have not had a single report, a single hearing on the regulators who were asleep at the switch through this whole episode. In our report, it says in december of 2017 the Los Angeles Times reported the employees failed to meet their quotas and the cfpb supervisor staff was embedded and wells fargo notified that the Los Angeles County City Attorney would file civil suit on sales practices and this was on may 4th and finally on may eighth 6 months after the fact the cfpb comes rolling in to save the day. Director card way was asleep at the wheel again and it is unfortunate because this is a situation, when your predecessor was in front of us, i asked the question, regulators live in your bank. How many regulators were in your bank . And you told me 75. Do you know how many are in your bank fulltime today . No i dont but it is significant. When you say more than that . I would guess more but i will get back to you on that. They have regulators sitting in your facilities, knowing the practice is going on, told about it by the Los Angeles Times and six months later they take action. The situation continued to grow and out of control, afterthefact trying to find a way to stop the nonsense. Something i asked your predecessor when he was here because there was a situation even according to our own report verifies there were 1000 people a year for five years being fired for their actions and involvement in this scales scheme situation. I asked at the time there was a third year this happened what is wrong with your culture . We have a situation, i understand you recognize your problem and you are not fixing your culture, the culture is not fixed, how do you fix it . We have a new individual take over. My question is how to change the culture your predecessors never addressed. What are you doing different . How do you see yourself Going Forward with teams certainly we have to be clear how a series of things come together to form a culture, we as a senior Leadership Team need to behave that way. That includes changing compensation, the way we evaluate people, things we look at to include risk and Customer Experience as part of that evaluation. Anytime we see any harm we have to deal with it as quickly as we can. If there is wrongdoing inside the company dont just look at an individual and say they did something wrong, ask the question do we have something in our structure that is wrong. All those things come together with accountability being the most important thing. I want to follow up with something my colleague mister barr talked about, allowing the government to change your Business Model, i am concerned about attempt on the other side of the aisle to intimidate you and your board and changer Business Model by doing or not doing business with certain industries. To me this is something you as a board and the leader of that company need to make, dont allow the socialization of your Business Model by the government to control it. With that i you back the balance of my time. It is called standing up the choke point the we are talking about here today, you want to deny that but that is the truth. The committee will come to order. The gentleman from new york, mister meeks, who is also the chair with the subcommittee on Consumer Protection and Financial Institutions is recognized for five minutes. I want to thank the chairwoman Maxine Waters and the chair of the Oversight Committee mister green for doing the work and the research that reveal a continuing pattern at wells fargo over this period of time. I think to Mister Scharf this is something that should be an opportunity because if you look at what took place, most of it or all of it this four months should give you further ideas of what needs to be done to fix wells fargo to move forward. It would be an opportunity to look at it and take it very seriously. For me coming in, anybody on the board that had anything to do with the way you clean things up, you clean everybody out. Anybody that is there that was part of the decisionmaking process while these procedures were going on do not have clean hands, dirty hands. That continues to be there. The only way to fix an organization in that regard as far as im concerned is you clean out. I will in full disclosure, i have had the ability to work with you in your previous capacity at bank of new york mellon. I dont know why you took this job because anybody there has got to be held accountable and look to see what you are going to do i have taken mister sloan to task in a very strict way and i intend, whether they resign or not, these board of directors that were there, part of the policies, i will take them to task tomorrow. I do think you should take this report seriously and to heart that are necessary, i have been talking to you about some issues that have been important to me and the subcommittee on which i sit on. Two of them. One is with mdis. There been a series of hearings, my big banks shouldnt be. They dont want to be there. Local communities and trying to make sure these Community Banks and mdis by institutions did capital from the big banks and had that discussion, you told me you were going to discuss it and come back, have you had that discussion . What if anything is wells fargo looking to do, to figure out how to put capital into some of these big banks. Small community mbis. We are going to do something about it and agree about the importance of depository institutions and as you said they reach neighborhoods we cant necessarily reach and we have been focused historically on connection expertise but it is more about capital as we learned. We will commit to invest 50 million of capital directly into institutions as tier 1 or total regulatory capital. Keep them in a position where they are minority owned but provide the opportunity. I want to go through that with you on a continuous basis. We have been talking about we dont want big banks to just give i want to further dialogue in conversation with you in regards to that. I want to know about rate modernization, with cra credit for mortgage loans. That is going to stop people from giving out mortgages. I would like to get an answer from you whether you think that is the appropriate thing and the way the controller is looking to do with cra modernization. The gentleman from michigan, mister huizenga, recognized for five minutes. Let me start with a tone of unity. I will agree with my friend from new york, mister meeks, who said im not sure why you would take this job. I would agree. It is in all seriousness, this is a significant undertaking. Im glad you are doing it because we know the United States to remain competitive in the world stage needs to have Financial Institutions that can handle these Large International and National Accounts but there are problems in the past. Mister scharf, i am interested in what changes to the Consent Order plan writing process have you made since you have taken over as ceo . My understanding is none of the Consent Orders have received a on objection. That is what regulators call them, instead of approval. They have objected to each of the Consent Orders is my understanding, i am curious about the process how you are dealing with that and an update on that. We manage the Consent Orders. I personally am deeply involved in all our control related work including all the Consent Orders. Our new chief operating officer who has experience dealing with issues like this at another bank that was going through a series of issues is on board and the responsibility sit directly under him. He is probably spending 90 of his time on these issues. A group of people dedicated to managing each of these individual Consent Orders alongside all the people across the company to ensure work is getting done appropriately. Can you identify the Biggest Barriers to achieve those acceptable submissions under the Consent Order . I think or what you believe regulators may not have identified or maybe they have. The Biggest Issue is making sure everyone across the Company Including those in the frontline understand Risk Management especially operational Risk Management is everyones job and we need to educate them how that fits into a single structure inside the company with independence and the second line. That is the barrier for you to receive those nonobjections from regulators or is there more to it . I cant speak to what happened before but based on actions i have taken, there is a different sense of urgency, different focus, we have different people with different disciplines so we are fundamentally managing these differently, we made clear these are the priorities of the company above all else. You updating those Consent Orders are working with regulators to get those in order . We regularly talk to our regulators. You touched on everybody on the front lines needs to know what the new culture is. Can you describe how sales employees are incentivized and does the company use sales goals and those kinds of things . We changed all the practices that led to bad behavior including sales goals that led to bad behavior was our frontline bankers are paid based on a series of criteria none of which are sales goals. It is things like Customer Experience, balances in the overall count and things like that. How do you measure Customer Satisfaction . Historically we used a thirdparty where they do Mystery Shopping in the branches and provide feedback directly to the branch and moving towards net promoter score. A couple quick thanks. Can you talk about the board makeup . One of my questions for my colleague from new york, cleaning house, what is cleaning house look like so far . Dont have numbers in front of me but Something Like 70 of the board is new since 2017. I heard 14 out of 16. That would be helpful. I see people behind you taking notes. At the end of the day can you describe what cultural changes need to happen . Absolutely. Time is expired. What changes are necessary and we can follow up in writing unless the chair is willing to give you 30 seconds. The gentlemans time has expired. Mister clay, chair of the Sub Committee on housing, community developed, insurance, recognized for five minutes. Thank you for your testimony. Recently the student borrower protection center, an organization founded by student loan ombudsman seth rockman released a report card educational red line. The report found borrower is taking out private Student Loans to attend Community College may pay more than similarly situated borrowers seeking loans to attend a 4year institution, sb pc applied for student loan products with wells fargo and found wells will charge a 10, 000 loan to attend Community College, 34 more than a similarly situated borrower seeking the same loan to attend a 4year college. You think that is fair . There is no room for discrimination in any of our lending businesses. Are you intent on changing the culture around . I look at the specifics but i am not aware of it. If weve done something wrong we will make it right and make sure nothing like this is happened anywhere. Also, under your consent decree, you have policy that stairs people who would otherwise qualify for prime mortgages into subprime mortgages, that is one of the Consent Orders. Are you aware of it . Now but we will look at it. How would you make those people whole that apply through your bank, and when steered into higher costs, what do we do to correct that . If weve done something wrong it is our obligation to take appropriate remediation, something to look at to understand what the right thing to do is. Would you assist by or help of those borrowers by reimbursing them or resetting the loans at a more reasonable Interest Rate . We would look at all the circumstances and figure out what the right thing to do is for those customers. I think your customers and most of us, looking for help. I completely agree. If we harmed people were not treated people properly we should take appropriate remediation. Getting into another area, do you know wells fargos lending environment in the southern illinois, the volume for minority of women owned businesses . I dont. Could you get me that information and share with the committee . I will go back on that. What incentive programs are in place for wells fargo employees in retail and private banking, for bonuses and talking about an incident i recently read about. I dont understand the question. The typical Retail Branch tends to be on the lower end of the pay scale compared with corporate and investment banking, high dollar customers. We have changed the Compensation Plan so no longer paid on the sales goals, Customer Experience and other factors, nothing relative to sales goals. How do we address the culture of the bank that you treat customers with respect and dignity . We are moving the Customer Experience method of rewarding people. Thank you and i yield back. Mister tipton is recognized for five minutes. Thank you for taking the time to be here, to follow up on sales goals, the reason mister sloan was here and you are here is from sales goals to some of the initiatives that were put in place with false accounts that were opened can you expand on that a little more to understand how Customer Experience expanding some of those balances, how that will be rewarded and any further views . We changed the entire Compensation Plan and the Management Structure and the reporting so anything related to sales goals and management processes that went along with it are no longer there so people who work in our branches regardless of level have a series of things to judge their performance most important of which if you ask folks it is Customer Experience, mystery shops take place inside the branch, we are moving towards direct Customer Feedback which will be part of that. We believe the customer is not happy and i the institution than that is very bad for us. Are you pretty confident you have a reporting structure through the chain of command and make sure that is implemented properly . Yes i am. In your first Earnings Call you mentioned you would be introducing new disciplines on how the company will be run. Could you outline what the new set of disciplines might look like and how they are different from previous occupancy . We have an operating committee that meets regularly every single week for two hours, once a month for a full month. Everyone is expected to talk about what is going on in their businesses. How they are doing with control issues that we are aware of warfare is anything more we should be aware of. We hold the cfo and i hold monthly reviews that were not held in the past where we meet with every business along with senior folks and we review their risk controls and progress they are making on people including diversity component and added to that is a budget process which is more robust and something we had in the past which is a mechanism to proactively discuss things and make decisions that were made in individual businesses. I come from a rural area and we have a lot of conversation in this Committee Regarding urban impacts. Could you highlight for us the importance of wells fargo has a number of branches in rural communities. Does that play an Important Role in terms of Credit Access for Small Businesses . It is extremely important not just for numbers but does go when we think what wells has done well and not well, helping in underserved communities is the core of the company so the branches that we have in communities where hell have been for a long time are important to us, the investments we do affordable housing, the lending that we do is something that is core to the company isnt Going Forward. We would like to give you the opportunity for the stress tests and whether or not regarding the coronavirus and other challenges may come up for a Financial Institutions to feel you are wellcapitalized and able to take that into consideration. The point i was going to make when you look at the stress tests we went through it takes unemployment to 10 , gdp down 8 , real estate values dropping, very significant. As part of the process, we have to be able to maintain the ratios required in that event with justin capital actions and as an institution we do our own stress scenarios that lead us to make decisions and how to run the company. Weve always done that prudently with all these is wells has done, we are wellcapitalized and we will continue to be wellcapitalized. I yield back. The gentleman from georgia, mister scott, recognized for five minutes. Thank you. Mister scharf, how are you . Thank you, fine. You know our Banking System is the heart and soul of our financial system. This hearing this morning at its core is about trust. It is about consumer trust. It is about wells fargo customers trust. What i want to ask you is this. Can the consumers, can the people in this Country Trust wells fargo now . People can trust wells fargo to do the right thing, yes. Then why is it you had Consent Orders, you had Consent Orders from the office of the comptroller of the currency, you have had Consent Order from the Consumer Financial protection bureau. You have even had Consent Orders from the Federal Reserve and to my information, you have not adequately answered those. Am i correct . You are correct. May i ask you to explain why you have not responded . I joined the company four months ago. Im not in position to explain what was done right or wrong because i wasnt there but the changes that we are making which are different than existed prior to my arrival. I will tell you that this is important, for you to really understand. You have a myriad of customers out there, one of which is me. I am a customer of your bank and have great experience with it. You have been a leader in my community with helping get some of the hardest hit funding to help folks out there who are suffering, this committee worked hard to get that done. We didnt vote for the first bailout. Obama got a little peeved with many of us but we said mister president , we love you, we want you to do good but you cant take this money to the banks and not do something about the struggling homeowners who were the victims. And go back and do something about it, we do, with 2. 8 billion and the hardest hit are safe. There are some good things that you all have done but my issue is that you are on this in a new position but it is important once you get in a bad situation in order to get out of that bad situation into a new situation, you have to know how you got into the bad situation in the first place. For you not to respond to these Consent Orders is unacceptable and i want to urge you to do so now. That would be a good idea because to have your new chief accountability officer wells fargo, according to your report created a new role of chief accountability officer for the Branch Banking business. Are you aware of that . I would think you are, being a chief executive officer. Yes i am. Why is it you cant assign him to respond to this . If you dont respond to these Consent Orders that are being asked of you by the banking regulators, then that trust factor that i mentioned at the very beginning is weakened. Will you move to respond to those Consent Orders after this hearing . All of my energy is stacked against responding to them in a way that is acceptable to them. Thank you. The gentleman from texas, mister williams, recognized for five minutes. When johnstone came before this committee not long after the first wells fargo scandal broke it seemed the only answer he had was i dont know. I called on him to resign immediately for such lack of knowledge into his own companys practices. This was a slap in the face to all members of this committee. More portly to the consumers that were taken advantage of because of his gross mismanagement. His answers were unacceptable. Fast forward to 2019 when the next ceo, tim sloan, came before us to testify i was optimistic that he could fix the root causes of issues that allowed so many scandals to occur. Made it seem like there was great progress, institutional changes to make sure these actions would never be able to go unnoticed again. This might be an even more offensive than his predecessor was. I dont know. Answers, since he was not taking the companys transgression seriously when the damage was done to customers. All that on a more positive note, i am glad to see wells fargo bring you in to fix the mess that has been surrounding the bank the last few years. Its not an easy process, regaining the committee, the customers, regulatory distrust and i hope you will be to get the bank moving in the right direction so you have Prior Experience at mellon, jpmorgan, and many other Financial Institution so my first question is i want to know how Management Structures differ between wells fargo and other firms you have worked and give you the opportunity to go into detail about changes he will institute at wells fargo moving forward. What we have today is more similar to other large wellmanaged institutions versus what we have in the past. It is a federated model and representation for all the different businesses. The discussions that were able to occur in terms of how the company that was run, the structure didnt encourage that to happen. Things today are very very different. There is a clear understanding that we are going to run the company as one, with significant business that report directly to me where we have the opportunity to question what goes on. Theres an independent infrastructure around the risks moving forward that need to happen. People understand that is independent and the level of accountability they have. Having said that it is still early on. I do not think we are as wellrun as other firms yet. We just implemented this but everyone understands why it is better for the company and is supportive of it. The question is important. The other side of the aisle has reiterated wells fargo is too big to manage and should be broken up. I completely disagree considering other banks of similar sizes have been able to successfully cooperate when they have appropriate Risk Management structures in place so i ask the same of mister sloan and i am curious to get your perspective on the issue. When former president obama was questioned about breaking up big banks in a New York Times interview he said one of the things i try to remind myself during the course of my presidency is the economy is not an abstraction, not something you can just redesign and break up and put back together again without consequences. That is what president obama said. Do you agree with the sentiment that breaking of the biggest banks is unrealistic . I believe the country benefits from the large banks and can be run properly and should be run properly. I am a car dealer in texas, 50 years. I know how important access to capital is for the Company Looking to grow and expand operations so one of my questions is are you a capitalist or a socialist . I am a capitalist. Since wells fargo is one of the Small Business leaders in the country i would like to know what controls are in place to assure business clients like me are being treated fairly and not suggested to sales goals or incentive programs. Our Small Business franchise has the same controls over it today the consumer franchises and corporate franchises have. We have first line Risk Management which is more robust than a first line meeting of the business, far more robust than it was at the time of the sales practice problems and in independent risk function which is separate from them, independent reporting line up to the chair of the Risk Committee of the board. I yield back. The gentleman from texas, mister green, the chair of the Senate Committee on oversight and investigations is recognized for five minutes. Thank you, madam chair. Please allow me to thank the persons who worked so hard to put this together, they literally had to fight to get the thousands of records they received. It was not easy. The republicans played no role in securing those records. They are simply playing catch up, and not doing a very good job. Mister scharf, we cannot allow the punishment for this level of fraud to simply become the cost of doing business. No one has gone to jail. It is true the ceos of the too big to fail banks have been too big to jail. We must do more than simply pay the government a fine. Most of the frontline workers in these banks live paycheck to paycheck while the banks have made profits in excess of 150 billion a year, 150 billion a year since the recession. In 2018 a bank ceo made 776 times the salary of a minimumwage worker. That ceo made 24. 2 million. I will not mention his name but i am prepared to if i have to. I have visited with you. Thus far you have been straight with me and i do believe out of adversity there is opportunity, the greater the adversity the greater the opportunity. You have an opportunity to help us change not only the culture at your bank but to change the culture across banking. Workers need a living wage, all workers in banks should have a living wage. Workers need stronger whistleblower protection. This is a part of the solution, not nondisclosure agreements that silence workers. If we have stronger whistleblower protection i do believe someone would have reported this circumstance and we wouldnt be sitting here today. We need to improve your mentor protege standing. Black banks are going out of business. We have 18, 19 depending on who is counting and how you count. We need help. You are in a position to change this. You can change the course of destiny for minority institutions, mdis. The lowest paid workers in banks are women and people of color. The highestpaid is disproportionately in both cases are white men. White men are doing well. People of color and women are not doing as well. We can change this. These are the kinds of issues that we refuse to confront because there is a danger associated with it. There is a culture that has developed that will punish you if you try to develop equity and equality. It will silence you. You can speak with a very loud voice. You are not a part of the transgressions that took place but you can take part and i believe you want to be a part of a solution that can change not only the culture at wells, but the culture across banking. We need a bill of rights for the workers within the banks. We ought to have something that is clear, concise, and conspicuous, unambiguous that says to workers you mean something not only to this institution but to this country. Here are your rights. Did you have the right to report without fear of being somehow punished for youre doing the right thing. I am going to ask that we meet again. Will you assure me you will meet with me again . Absolutely. Will you assure me that you will work with me to develop this bill of rights for workers . Will you assure me . I will absolutely work on a bill of rights, makes sense at wells fargo. I yield back the balance of my time. The gentleman from georgia, mister loudermilk, is recognized for five minutes. Thank you for the time we have spent, discussing your short time at wells fargo your vision how to correct these problems and move forward to make Wells Fargo Organization and compliance and focused on its customers but i would like to remind my colleagues i heard something earlier my republicans took a hear no evil see no evil stance on this was it was republicans in 2016 the first year i was on this committee that began the investigation into wells fargo and we obtain several hundred thousand pages of documents and this report that was submitted today is not the first, not the second but the third report that was based on those documents and thousands more that the Trump Administration has released so this isnt something new, something that popped out of the woodwork, this is something that we have given our utmost attention to and it has been frustrating. I have been frustrated and concerned over the lack of progress we saw over that time when it came time to comply with Consent Orders by the regulators. From our meeting and other information that i received i am encouraged that the occ indicated under your short tenure the mink made progress in complying with these orders. Your short tenure, everyone knows the past, you will get the same questions repeated over and over again so everyone can think they are soundbites. Some of mine may be questions i have asked before but i want to hone in on some of the details and could you briefly describe specific actions you and your staff are taking from a Risk Management perspective to come into compliance with 14 outstanding Consent Orders regulators have imposed . The issues in Risk Management related to Operational Risk and compliance. We significantly increase the staffing, but more important, putting the right framework in place so everyone understands how we are going to run risk and their role in ensuring it is done properly in the organization. The framework makes clear what everyone in the business has to do, what their level of responsibility is and how to do that review independent of the business itself. The third line plays an Important Role, and looking what is done. Those levels of independence are important but most importantly the robustness of what we have in place, not just the people that exist but the processes and documents we are building create a very different control environment then existed historically at wells. You stated this before but i would like to ask again, as mister scott stated, i am also a wells fargo customer, under your leadership, regulators and expectations as well as needs of the customers. I take it a step further which is what i explained to people, not just because regulators wanted, it is the right way to run a company and we need to do this because we believe it is right and we run the company that way, regulators will be fine with it. Final question based on time. We talked about restructuring from a more federalist type organization to a more streamlined centralized organization. How did that decentralized organization contribute to this problem and how does centralizing it resolve it . That structure didnt have the appropriate checks and balances, Business Leaders control their own staff functions and everything that goes along with it. There wasnt a consistent set of policies or the independent functions to agree with what they are doing or not and we need to change it. Thats what we have today and that overrules individual businesses. I yield back. The gentleman from missouri who is subcommittee on International Develop and policy, recognized. Thank you, madam chair. Your two predecessors testified before the committee. Here you are less then six months on the job and you are sitting in that chair. Why would you take this job . Appreciate the question. Youre the third person who said that since we started so i am glad to answer it. I believe, i genuinely believe wells fargo is an Important Institution and just because the company has not been well run doesnt mean it cant be will run. When i talk to consumers to Small Businesses to middlemarket companies, when i look at the things weve done in communities, when i talk to our own people i was in a branch yesterday and asks why do you come to work every day, i swear she said because i love this many, the opportunity you have given me. That clearly wasnt the entire culture of wells fargo but it is what the culture is, doing what is right for the communities. I believe if we run the Company Properly we have the opportunity to benefit more than if we didnt do this well. Thank you. You have got to have something. Let me 10 to the difficult part. I have the minority report from senator sherrod brown, march of 2020 which i would like to enter into the record. Without objection such is the order. Here is what is troublesome. It is about one of the blog posts of one of the employees, hate crimes, i am quoting, hate crimes, hoaxes are 3 times as prevalent as actual hate crimes. I hate that i dignify their existence by quoting the statistic, that recognizes them. Lets say that they call him the in word. Would that make them racist or just blank holes . Looking for the most convenient way to get under his skin . This is a guy who worked at the cfp v, appointed position at the cfp v, which for somebody like me, my skin color, that is insulting and disheartening. I am using this because there is a report that suggests back Channel Communication between wells fargo and cfp v. My final question, this is still in existence to your knowledge . Im not aware of a back Channel Communication. First time you heard about the alleged back Channel Communication . I read the report. All the conversations we have with cfp v to my knowledge are open on the record conversations directly with the regulator that everyone is supposed to be aware of and should be aware of. That is the answer i am looking for. The person who made these statements is no longer a but i am very concerned. I was here when the chairwoman and by, we were here when the cfp v was created and people who were not here choose to accept it or not, great pain was taken to make sure the cmp v was not politicized all the way down to keeping congress from getting involved in the funding of that department. You have already read the report and i advise everybody to read the report, chilling when they start quoting some people making decisions and i yield back the balance of my time. The gentleman from ohio is recognized for five minutes. I thank the chairwoman. Mister scharf, thank you for being here. It has been a long and unfortunate tradition, a disproportionate amount of time in the nations the federal government spent a lot of Energy Running all sorts of businesses they have no business running and even with all sorts of oversight with layers of redundancy. It feeds the narrative that we need more regulation. In spite of all the regulation, all the doddfrank reforms and state regulators and federal regulators and fdic and Federal Reserve and all kinds of laws that make it illegal to do things wells fargo employees did, these bad things happened anyway. There are human beings in all sorts of other companies but we dont believe it happens to the scale, these bad things that happened. What makes wells fargo so special . Now that you have been there, why did this happen at wells fargo . Your point is very fair. We did not have appropriate controls in place, we didnt have the appropriate culture. The humans there needed the other controls that other places have, what drove these people to do it . Was it passive . And affirmative push to do bad things. They should have caught it after the fact but the initial problem was the structure of the company was decentralized, the culture promoted these types of activities, and the culture was not one of accountability. There has been a lot of culpability at least financially for wells fargo. How many find in total of wells fargo paid as a consequence of these bad actions . I dont have that number. Is it a couple hundred bucks like a speeding ticket . A couple hundred million bucks or a few billion . Billions. Billions of dollars. It is fair to say if these culpabilitys result in billions of dollars in fines, did people lose their jobs . Many people have lost their jobs. At the top . Ceos are the third Board Members, bank managers, managers of departments, people that were supposed to manage risk, lots of people held accountable, lost jobs, has anyone gone to jail . Not that im aware of. Was any of this rise to the level of a crime . When we settled with the department of justice we stated a series of facts that concluded individuals committed crimes. The department of justice to follow through and actually hold someone accountable. I think it is up to the part of justice to determine what they think is all of america looking for the department of justice to hold people accountable and it is not just in banks. We are wondering when somebody is going to jail because there has been all sorts of abuse of trust in our country and the government has violated a lot of it themselves. Wells fargo, you have taken some actions that are encouraging a short time as ceo and when you look around by reputation you say it looks like the potential has come in and changed a large organization. The one you created was sales practice oversight management function. Could you describe what you envision for this new role of what policies need to be put in place at wells fargo to ensure employees are held accountable for their actions . Yes, congressman. Since our self practice scandal, we had different sales practices to ensure we dont have the same kind of behavior that existed in the company prior. One of the things we want to ensure on a Going Forward basis was as we continue to evolve as a company that that continued so to centralize responsibilities, they set the standards, monitor what is necessary on a consistent basis across the company. And dont wake up and find something that exists in the future. The committee stand in recess for five minutes. [inaudible conversations] [inaudible conversations]. [inaudible conversations] [inaudible conversations] sunday on after words, former Deputy National security adviser Katie Macfarland gives insight into the nations political process and the Trump Administration in her latest book, revolution, trump, washington and we the people. Where a very dynamic country. Demographically, geographical, socially, economically. We are constantly reinventing ourselves. Not just as individuals but information and government by its very nature is the status quo institution, this is how was all done things. We would do this thing the same way again. Its people who didnt get stuck and its the status quo. America set up to have these revolutions, political revolutions. We had one in the very beginning in the American Revolution that ever since then we have mostly had the revolutions played out in the ballot box and thats what we met up now. Watch kt mcfarland with the book, revolution sunday night at 9 p. 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