Transcripts For CSPAN3 Senate Banking Hearing On Wells Fargo 20171004

Ceo Timothy Sloan appeared before the Senate Banking committee yesterday. He testified on the banks business practices. Last year the bank was found to set up several unauthorized accounts without customers knowledge. Mr. Sloan was asked about changes that were made in light of that disclosure and how the company was complying with federal regulations. This is about two hours. This hearing will come to order. Before we begin today, let me acknowledge that our nation is still mourning and remembering the lives lost in las vegas. Our condolences go out to the families effected by this heinous crime and our thanks go to the courageous First Responders and police and citizens who put their lives on the line to save others. Two members of this committee, both of the senators of nevada, are absent today because they are in nevada. And i know that senator heller and cortezmasto are doing all they can there and we will remain united in prayer and support with them during this difficult time. Today were going to hear testimony from wells fargo chief executive officer and president tim sloan. Welcome, mr. Sloan. Thank you. Just over a year ago former wells fargo chairman and chief executive officer john testified. Of the many issues emphasized by the Committee Members during that hearing, one was the need to hold executives accountable and to ensure that customers impacted would be made whole. Mr. Stunford repeatedly repeated that the bank would take actions to restore investors trusts in the company. Incidents like this remind us how important it is for companies to Institute Policies and procedures that foster customer protection, promptly identify and treat customers fairly. Since that hearing, wells fargo has made changes to its corporate and managerial structure in an effort to daes the concerns. However new developments in the disclosures at the bank during the last year merit new scrutiny. On august 31, 2017, wells fargo announced the results of an expanded review of Retail Banking accounts which included accounts opened between january 2009 and september 2016. The expanded review found the number of potentially unauthorized accounts was 3. 5 million instead of 2. 1 million. Separately the Company Discovered problems with respect to its auto collateral protection insurance or cpi program and selfreported these issues to its regulators. In response to complaints, wells fargo received policies purchased on behalf of customers between 2012 and 2017 and found that up to 800,000 customers may have been harmed by wells fargos cpi practices. The end result was that customers were charged for Car Insurance that they did not need and some had their vehicles wrongfully repossessed. For families having your car repossessed or credit compromised is devastating. These new developments raise a number of questions that wells fargo must answer. Including what has wells fargo done to ensure that customers effected by any of these issues are or will be made whole. In more complex cases where customers Credit Scores were negatively effected how is wells fargo working with other parties to restore those Credit Scores and return amounts where customers experienced higher borrowing costs. What structural changes has wells fargo in the last year to address both past issues and new revelations and what evidence is there that new policies and procedures are effected . Finally, as members asked last year what has been the involvement of regulators since the incident the initial incident and in response to the new disclosures . We welcome your comments on these matters, mr. Sloan. And before we get to the testimony, senator brown. Thank you, mr. Chairman. I echo your comments about citizens of las vegas and those many visitors that also lost their lives that were injured in that terrible shooting. Our hearts go ought to all of them and their families. Special concern also to senators heller and cortezmasto on this committee. I hope after every tragedy, we always say our hearts and minds go out to their victims. I hope that the United States will actually do something about this for a change. A year ago then wells fargo ceo john stump sat in this hearing room attempting to explain the inexplicable banks punitive sales goals has pressured its employees to opening over fraudulent accounts and credit card accounts. Committee democrats asked mr. Stump if he was confident that this type of fraudulent activity existed in no other part of wells fargo. We asked about a variety of products including insurance. On november 15th, 2016, wells fargo responded, quote, we believe that the activity at issue here was limited to Certain Team Members within the Community Bank division. Weve learned over the past year that the problems at wells are much larger and more systematic than the bank originally disclosed before being forced to come clean by a multiagency investigation, wells fargo went to Great Lengths to bury, to bury this scandal. Its subjected customers to forced arbitration, preventing them from their day in court, further concealing the fraud. Employees let me give examples, employees who tried to alert Senior Management to the treatment of wells fargo customers were silenced or fired. 2013 a california customer sued claiming wells had opened several unauthorized account in his names. Wells fargo forced, forced that case out of the courts and into nonpublic arbitration claiming that the terms of a real account should govern the fake ones. Think about that. Using forced arbitration, wells forced that case out of the courts and into nonpublic arbitration claiming that the terms of a real account should govern the fake ones. In 2015, another customer in california filed a class action against wells for the same practices. And the bank again used its fine print legalese to fight to keep the case under seal. Again using forced arbitration. Has the Company Changed . Just two months ago wells used its forced arbitration claws again to argue that it shouldnt have to pay customers it cheated on Overdraft Fees. In august of this year wells finally disclosed a number of fraudulent accounts was at least 3. 5 million. 70 higher than it originally reported. The bank revealed that it stuck 800,000 customers with Auto Insurance policies as chairman crapo said without telling them or checking to see if they already had insurance. The bank was aware of these problems in its auto Loan Division in july 2016 yet wells ceo told this committee that fraudulent sales practices were limited to the Community Bank. This was not a casual response to a question that caught somebody off guard at a hearing. It was a written response that was undoubtedly approved by lawyers and others at the bank, maybe even you mr. Sloan, were among those who saw the response before it was sent to congress. A week after last years hearing the board of directors initiated its independent review of the Company Sales practices. The report to the board whose members i might add are paid an average of 370,000 for parttime job, 370,000 to prepare for and attend several meetings a year found that the fault lay elsewhere. Thats called comfort to the thousands of employees who make perhaps 1 10 of what these Board Members make who were fired for failing to generate enough new accounts. The board chose to limit the scope of the review to the Community Bank which is troubling. It shouldve known or should have wanted to know that additional problems existed in other divisions. The changes, mr. Sloan that his team made have made are not sufficient to reform a Corporate Culture that is willing to abuse its customers and employees in an effort to pad its numbers and in an effort to increase executive compensation. In light of the millions of americans defrauded the recent Equifax Breach that compromised 145 million americans personal Financial Information and the sec 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 forced arbitration in payday lending and Debt Collection and Mortgage Servicing and credit reporting accuracy rather than working to roll back, we should be supporting the Consumer Financial protection bureau, we should be supporting other financial watch dogs that stand up for hard working americans when Big Companies take advantage of them. Thank you, mr. Chairman. Thank you, senator brown. We will now proceed to testimony from mr. Tim sloan, the chief executive officer and president of wells fargo and company. Mr. Sloan, your written statement will be made a part of the record in its entirety and you may proceed with your oral remarks. Chairman crapo, Ranking Member brown and members of the committee, my name is tim sloan and im the ceo of wells fargo. I want to thank you for the invitation to the hearing on the wells fargo one year later. This was a year of disappointment and transition at wells fargo. When my predecessor testified here last year we hadnt fully grappled with the damage, the sales practices scandal had done to our customers, our team members and their trust in our bank. We recognize too late the full 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 and i herald our customers and our team members. I heard them loud and clear. You expect us to do better and so do we. So let me be very clear, i am deeply sorry for letting down our customers and our members. I apologize for the damage done to all the people who work and bank at this important american institution. When the challenges at wells fargo demand the Decisive Action we acted too slowly and too incrementally. That was unacceptable. I also want to be clear about another thing. Wells fargos a better bank today than it was a year ago and next year wells fargo will be a better bank than it is today. That is because weve spent the last year determined to earn back the publics trust. Since i became ceo 11 months ago, my team and i have been focused on three tasks were here to discuss today. First, in response to the sales practices problems announced in 2006. Second, we are reviewing operations and increasing accountability across the entire company. Now when a concern emerges we identify it quickly, we escalate it promptly. We disclose it appropriately and we address it fully. We will demand individual executive accountability. We have clawed back 180 million in Senior Executive compensation and we have fired senior retail, mortgage and auto lending executives for not performing up to the standards our customers deserve. Third, we are compensating every customer who has suffered because wells fargo made mistakes. Last year we reviewed 93 million open accounts opened between 2011 and 2015. This year we went back and took an even closer look at 165 million accounts opened between 2009 and 2016. Just as we expected we found more accounts that should not have been opened. This was not new potential misconduct since last year. It all happened before 2017 but it is a very serious issue all the same and we are completely committed to fixing it. Of the 3. 5 million potentially unauthorized accounts, about 190,000 incurred 6 million in fees and charges. Wells fargo is refunding every nickel and we are paying 142 million to compensate all effected customers including for increased borrowing costs from credit score impacts. Apart from this formal reimbursement mechanisms wells fargo is committed to addressing any concern that any of our customers may have about an unwanted product or service no matter where or when it may have occurred. If there is a problem, we want to hear about it. This past year has been humbling and challenging. My number one job as ceo is to make sure that nothing like this happens again as wells fargo. Fortunately joining me in this big task are 270,000 outstanding Wells Fargo Team members. Im proud of their hard work and want to thank them for their commitment to making things right. I see improvement every day and so do our team members. I think our customers have noticed the improvement too. I pledge to you that we will not stop until we restore our Customers Trust and make wells fargo the finest and most Ethical Company it can be. Thank you again for the opportunity to address the committee. I look forward to your questions. Thank you, mr. Sloan. In our hearing last year members of this committee asked many questions about how customers and consumers whose Credit Scores were impacted would be made whole. In cases where customers Credit Scores were negatively effected how is wells fargo working with other parties to restore those Credit Scores and in cases where customers experienced higher borrowing costs reimbursing those costs . Chairman crapo, were doing that in a few ways. First and foremost, we went to the Credit Bureaus and provided the names of our customers who accounts could have been inappropriately opened. Unfortunately, because of regulation the Credit Bureaus couldnt provide us with the detail of those customers back to us. What we saw when we looked at that is about 40 of those customers had no use of their the trade lines within a year so their credit was not impacted. Of that remaining 60 , about 25 had no impact on their Credit Scores. We found that the median impact the mean impact was about 4 points but numbers are just numbers because certainly more customers were impacted and some could have been impacted Credit Scores by more than four points. What we did was we reached out to 43 1 2 million Small Business and consumers and said if you have an issue come into wells fargo and see us and we will make it right. Approximately 41,000 customers have come in based upon that, about half had credit related issues and weve made it right for those customers. In addition as part of the 142 million settlement that i mentioned, the lions share of those funds are going to go to customers whose credit score have been impacted so were going to be working with the experts, the attorneys for the class have provided, were going to provide them with whatever information they want. Were reaching out to those 43 million customers again as well as tens of millions of former customers to make sure that they know about the Class Action Settlement so that they can be made whole as part of that settlement for any credit impacts. Thank you and some of the actions required by regulators as a part of your september 2016 settlements include the establishment of a Compliance Committee carrying out and enterprisewide risk review of sales practice risk and maintaining enterprisewide sales practice Risk Management and oversight. What is been the involvement of regulators since the initial incident including in response to the new disclosures about the increased amounts of unauthorized accounts as well as the cpi issues . We have an active dialogue with our regulators, the Federal Reserve, the occ and the cfbd when were talking about bank related issues so theres a tremendous amount of dialogue. For example, as it relates to the clat ral protection or cpi issue, when that got escalated in the Third Quarter we reported it to our regulators on a realtime basis and weve been working with them not only to keep them apprised of those issues but also in particular with the occ working with them to make sure that the remediation plan we had for any customer that was impacted by cpi is acceptable. As it relates to the fundamental changes that ive made since i became ceo, weve done the following things. First and foremost, weve centralized all of our enterprise risk and control activities. That was one of the failings that the report from the independent board of directors found and we agree with that. So those have been centralized. Were hiring a new compliance officer. Weve completed and devised a new compliance plan. Weve created a conduct office in the centralized risk group that independently brings up and complaints, ethics line issues so we can connect the dots better than we did a year ago. Senator brown . Thanks, mr. Chairman. I dont think we have a good answer yet mr. Sloan as to how and why this activity went on for so long at your bank. The Company First blamed rogue employees. Were trying to meet unrealistic sales goals. Then blamed the Senior Executive Vice President for Community Banking who earned 9 million in 2015 then finally john stump the chairman who earned 19 million that year. Youve been at wells fargo for a long time, 30 years youve been coo, chief Administrative Officer which includes overseeing insurance. Was there no point mr. Sloan prior to 2015 with the lawsuits and the terminations and the whistle will blowers, was there know point that you saw a problem in the bank that required action . Thats incorrect. Fact ive been very public and ive made the statement on a number of occasions and also it was finding of the boards report that in 2013 when the sales practices issues were elevated to the operating committee i sat on that operating committee, youre absolutely right. And my role at that time as coo that it was elevated to that group. We took action but in hindsight, senator, we took action that was insufficient as i said in my Opening Statement. And im angry about how we handled the problems historically. Im disappointed in how we have done how we handled those, but the fundamental change that ive made since weve been ceo are addressing the failings that the board report pointed out, our regulators pointed out and what the mistakes that i saw in my prior roles. Thats thats an answer but as the cfo, long Time Employee of that company is having a strong close relationship with mr. Stump. It still per plechlz me why your anger now or speaking out about it four years ago couldnt have had more impact. Youve testified about how wells has changed but i think actions speak louder than words. For your bank used forced arbitration to hide cases where customers allege fake accounts had been opened in their names. The 2013 lawsuit, 2015 lawsuit that wells was able to squelch because of the forced arbitration. Not only did you use forced arbitration to keep the fraud hidden, but the banks kept the fine print youve settled with some customers on that issue, your bank was still making that argument as recently as last month against customers in utah to top it off in august, you asked a court to toss out a class action on a completely different scandal that also goes back several years, again, based on the forced arbitration clauses. Many of your competitors are starting to eliminate or have eliminated the practice of stop the practice of forced arbitration, which would you commit to the committee today that wells fargo will quit using forced arbitration . No, i wont, senator. What i hear when i hear the word arbitration, when we have to have a conversation about with our customers about arbitration it means that we dont have the right product, we havent provided it in a right way, we havent responded to their complaint, so let me describe what weve done to change that. First and foremost, were doing a thorough review of all of our products and services to make sure that theyre the right products and services for our customers. In some situations we have stopped providing certain products because we didnt believe that we could provide them in the appropriate way. Second, were improving how we train our people to and our team members to sell our products, to provide the write advice, to provide the right service. Third, when a customer comes in were trying to resolve the complaint completely. One important change that weve made in our Community Bank and in my Opening Statement i mentioned weve made fundamental changes, now when you come into one of our branches, one of our bankers or tellers doesnt say i cant handle your problem, call this 1,800 number, we settle it right then and there. In addition to that as part of resofg the sales practices issues, we have expanded to a nationwide mediation, so we pay for a mediator to work with on behalf of our customers, its an independent mediator to work on behalf of our customers to resolve complaints. Im happy to say that of the 43 million customers that we reached out to in the Fourth Quarter those ones that you i apologize because i will want to followup on that and i will appreciate the long detailed answer and i think it was made in good faith but i also think that forced arbitration clauses always give the advantage to the employer, to the bank as we know. We know that. Thats a established fact. Youre still going to used those forced arbitration clauses to take advantage of your customers the way you did with the suit in 13 and 15. And the case against the customers in utah. Why should we believe youre committed to changing your banks practices in being fair to customers when you continue to use that that behind closed doors arbitration system that clearly doesnt allow customers their day in court . Senator, the reason is because i think weve made fundamental changes to the way that we do business so it will limit the number of times that that ever is to limit the number of times is good but give them their day in court, those that you are not able to help or that youre not able to satisfy. Senator, i look at the own study and the cpfds own study says arbitration is fast and efficient for consumers and the study said that consumers have better returns, higher resolutions with institutions selective reading of the study but keep in mind where they came out on that question. Thank you, mr. Chairman. Senator kennedy. Thank you, mr. Chairman. Good morning. Good morning, senator. Thank you for being here. Thank you. Like you i believe in the Free Enterprise system. I think the Free Enterprise system has lifted more people out of poverty than all the social programs put together. Im certainly not antibusiness, quite the contrary. We all on this panel talk about the importance of jobs. I dont see how you can be for jobs if youre against business. What im curious about is what in gods name were you thinking . Im not against large, im happy when businesses are successful. Im not against big. With all due respect, im against dumb. Im against a business practice which has which has wells fargo first and customers second. I think it ought to be Customer First and wells fargo second. I think thats better for the customer and better longterm for wells fargo. When did this start . Senator, i completely agree with you. Wells fargo cannot be a successful american institution, we cant employee 270,000 of what i think are the best team members unless we put our customers first. And there is no question that in our Community Bank we had an Incentive Plan that put selling products first as opposed to customers first. Nothing wrong with that if its good for the customer but when did it start . When did it all start . Its been investigated back to 2009 i believe. No. The board of directors looked back as far as 2002 and thats where they found and i agree with them that they saw instances of inappropriate Sales Activity under that plan. Senator, we should have ended that plan years ago. We made a mistake. Theres no question about that. We have ended that plan. Weve rolled out a new Incentive Plan to your point in our Community Bank that Incentive Plan rewards good Customer Service, it rewards providing products in the right risk mr. Sloan, i appreciate that and im really not trying to be rude. We just have a five minute limit and our chairman enforces it pretty strictly as he should. Can you tell me this, how many whats the total number right now of fake accounts you found . Senator, in our review going back nearly eight years to 2009, we found that because we couldnt call 165 Million People, what we did is we used a very conservative set, a data matrix to look at and it was done by the independent party what did you come up with . There were potentially up to potentially 3. 5 million potentially unauthorized accounts. And thats back to 2009. Thats correct. Did you go back further than that . Senator, we couldnt go back much further than that and the reason we picked 2009 and thats when wells fargo and away covia came together. As we went back further than that, the data starts to deteriorate. How much money did you make off of those 3. 5 million fake accounts . Well, again, senator they were potentially unauthorized. There were some legitimate accounts in that number but lets assume that they were all inappropriate. We found 190,000 accounts that we charged fees and that was approximately 6 million in total and weve refunded that. Was anybodys credit impacted . Not for those deposit accounts but for the potentially unauthorized credit card accounts. Their credit could have been impacted and were in the process of working to correct that. And you said you talked to the Credit Bureaus, are they being cooperative . Yes, they are. You said they werent giving you certain information. They cant when we provide them information about customers, they cant provide us the detailed credit and history without the customers approval. So what they did is they gave us data without the customer name so we could i thought you could buy it from them. Pardon me . We cant buy it from them but we and thats why its very important and an important part of the 142 million settlement that and thats really the linchpin of that entire settlement is to make it right for their Credit Histories and so thats how theyre going to be able to get their Credit Histories fixed. In addition, if they come in to see us, of course well go ahead and do that. Sure. Thank you, mr. Sloan. Thank you, mr. Chairman. Thank you. Senator tester. Thank you, mr. Chairman. Thank you for being here today mr. Sloan. Let me just go through what weve learned over the last year. In september of 2016 we learned that 2. 1 million wells fargo accounts had been fraudulently set up, credit checking, debit, unauthorized setting up. July 7th of 2017, we learned that wells fargo set up 800,000 Auto Insurance policies who didnt want or didnt need them. And then in august of 2017 we learned an additional 1. 8 million thats over and above the 2. 1 million, 1. 4 million accounts were set up for unknowing customers. That brings the accounts to 4. 3 Million People either fraudulent accounts or Insurance Companies if my math is correct and its correct. 4. 3 Million People, by the way, is over four times the population of the state of montana. Its a pretty good size chunk of folks. The chairman and Ranking Member of this committee in their Opening Statements basically asked you what have you done that you can tell us today that has changed this culture . This isnt one person. This isnt tellers on the ground. This has been a culture. So what can you tell me concisely that youve done and i know youve talked about, you know, transforming your Community Banks, but what as ceo that youve done or the board or whatever to ensure to us that were not going to be back here next week or a month from now or a year from now talking about Something Else . Senator, i cant promise you perfection but i can promise you that were working as hard as we can to get to near perfection. And that is were reviewing processes and procedures, turning over every stone. The first and foremost, what we had to do and what you criticized us for last year and you were absolutely right is we had to have executive team that took full responsibility for that. That was number one. Number two, we needed to reinforce that with our team. We went out and we talked to our team and we asked them what they were concerned about. They were concerned about things like pay. They were concerned about things like escalation of issues. They were concerned about things like exclusive accountability. They were concerned about things like revamping our equity lines and things like that. Ethics lines. Weve listened to our team and as youre listening to the team that faurd changes the culture and senator the proof of the pudding there is that our turnover is now down to its lowest level in four and a half years and in particular its down to its lowest level in our Community Bank where we had our biggest issues. Okay. So just to let you know, i hope this all works because i think its absolutely essential that it works. If were doing this again six months from now, its not going to be good. You talked about the things youve done, reviewing the customers and products and improving training, resolving problems. Talked about nationwide mediator. Who pays for the nationwide meetater . We do. Who chooses them. The customer does. We just go to independent Mediation Service and the customer the customers the ones that makes the call. We provide them with a list of names. They can decide who they want to use and well pay for it. Let me talk a little bit about what the Ranking Member talked about and thats forced arbitration. Is it true that youre using forced arbitration when it applies to a real account on fake accounts . Senator, weve dealt with that issue with the 142 million settlement. We didnt waive our right to arbitration there but what we did is we agreed to that settlement and we will said to our customers, come in to see us. We will make it right by them. If youre not happy well provide you with a mediator. Twhaent the question. Were you using forced arbitration from a real account and applying it to a fake account that was set up unauthorized . There were instances historically that we did that. Were not doing that today because weve addressed will you commit to not using forced arbitration on accounts that werent set up without the authorization of the customer . Senator, if we if theres a situation in which a customer yes or no will work. Yes. Youll commit not to use that. If we have set up an account that was inappropriately set up fraudulently set up without the customer well make it right by them. We wont use forced arbitration. Theres not a reason to have the conversation well make it right by that customer. Tim, that was being used six months ago i think my staff whiwhis period in my year that they were. I appreciate your question and were not doing that. Okay, and youre not going to do that. If we have set up an account tim, the only time i get in fights with folks who are talking is when they dont give me yes or no answer when i really ask it and the question is this, and you can ask it another way answer another way if you want. Will you commit to not used forced arbitration on accounts that were not authorized by the customer . The easy answer for that, senator, is yes because we havent done that. Were not doing that. And youre not going to do it moving forward. Thank you very much. Senator scott. Thank you, mr. Chairman. Mr. Sloan, thank you for being here this morning. Thank you. Obviously the entire Banking Committee is at least irritated by what we have uncovered and what you guys have discovered over time and part of it is, if its perfect 2011 to 2015 you had 2. 1 million fraudulent accounts, then you went back and did another search and from 2009 to 2015 its now 70 increase, were all those new accounts from 2009 to 2011, or did you miss some between 2011 and 2015 . The majority of the increase was in 2009 and 10 and then extending the period to september of 2016 but because we use an even more conservative view for the original time frame of 2011 through 2015, we did pick up a few additional accounts. So the vast majority of the 70 increase was 2011 to wu9 2009. 2009, 2010, the first part of 2011 and through 2016. So half a million customers were enrolled in Online Bank Payment bill pay without consent. 800,000 customers were charged for Auto Insurance without their knowledge. How about homeowners, Flood Insurance, property insurance . Because having spent 15, 16 years in the Insurance Business i will say that our insurance is probably the lower tier of what banks actually engage in charging customers for not having proper insurance. Homeowners is significantly higher percentage of folks typically find themselves being charged by the bank temporarily and Flood Insurance is another area where you see that happen often times. Are the numbers in the homeowners and the flood space just insignificant or do you have a number for that . We havent found any issues there, senator. If you have to come back in six months, which i think it might be good for you to come back in six months to have another opportunity for us to know what happened over the same time period more thoroughly, but my question is, if you havent found any instances of inconsistencies in other insurance related services, that would be surprising from my perspective having dealt with banks consistently for 20 years or so . How do we know, how do you know did you say you have 165 million customers . No we said we looked at 165 million accounts for that period. We have over 70 million customers. We serve one out of three u. S. Households. We were talking about that. We didnt think it was one out of two. 70 million customers, youre confident that 3. 5 million is the final number . Of potentially unauthorized accounts, yes, senator, i am. Let me talk for a second about the corrosive culture that doesnt start at local Retail Locations, it doesnt start with tellers. Corrosive culture starts at the top and then it seeps into the soul conditions and then it germ natures and folks feed off that. How have you changed the corporate leadership and the Corporate Culture that will find itself in the soul conditions at Retail Locations . So senator, first we looked at what were the caused the problems in our retail bank. First and foremost the issue within our retail bank was that we had an Incentive Plan that drove an inappropriate sales culture. That Incentive Plan has been ended and weve rolled out a new Incentive Plan. The feedback that weve gotten from our team since weve rolled back that plan weve now had two full quarters, well get the result of the Third Quarter is that theyre overwhelmingly very pleased with the plan. As we survey them theyre telling us that they like the new conditions as wells fargo. Theyre very happy. Weve actually hired back and weve hired 17,000 new team members into our retail bank since september, since weve made these changes, of those 10 are about, 17, 1,800 were team members that had worked in the retail bank that left because of the old culture there, or were dismissed because they didnt meet certain sales quotas. And to me, those folks coming back and agreeing to be part of the team reinforced that the changes were making in our Community Bank are taking hold. Thats good to hear that. My thought is this that your sales culture isnt driven bill the sales products. I think senator round can attest to the fact that ultimately its not the sales goals, its not the product selection, its the people and its the people who are in management positions who put more pressure for results than an average person can get and so if you havent changed the people its quite difficult to change the culture. I completely agree with you. Thats why i named the new head of our Community Bank group who i mentioned mary mac is doing an excellent job. She has gone through each one of the levels of management and had everyone literally reapply for their jobs. Weve reduced the number of managers to change the control, we eliminate aid layer but i agree with you, the issue is not just the Incentive Plan it was that we created a culture of managers that only knew how to manage because of that plan. So getting rid of the plan going through and making sure we had the best managers and then now were in the process of retraining everybody starting at the top. The senior levels before we get down to the folks in our branches. I completely agree with you. Thank you, sir. Senator warren. Mr. Sloan when you were named ceo after the fake account scandal, you were asked why a career as a wells fargo insider like you, why that made you the right person to fix the fundamental problems at the bank and you said quote, because ive been making change for 29 plus years at wells fargo. I want to take a look at your time at wells fargo. From 2011 to 2014, the height of when wells fargo was cheating customers by opening fake accounts, you served as the chief Financial Officer and as cfo you spoke to potential wells fargo investors a lot. On those calls you aggressively promoted wells fargos ability to open up new accounts, didnt you . No, i didnt. No you didnt . Nope. Well, here are the transcripts from all of the investor earnings calls that you participated in. Umhum. From 2011 to 2014. Ive read through them and on these calls no one, not even john stump who was the ceo at the time bragged more about wells fargos ability and commitment to open new accounts for existing customers. In the april 2011 call for example, i think ive marked that one, you said, i cant wait to get a credit card in every one of our credit worthy customers wallets. Nothing about whether your customers wanted or needed a wells fargo credit card. All that mattered was opening new accounts. So while you were bragging to investors about opening new accounts on these calls from 2011 to 2014, you also personally owned roughly 2 million shares of wells fargo stock is that right . Senator, i dont recall how much stock i owned in wells fargo. Im a proud shareholder. Sure its public. If thats. Its all out there. Then 2 million shares, so it looks like you had a really good thing going, talk up wells fargos ability to open new accounts, get investors excited and hey, if the stock goes up by a dollar, you make a cool 2 million bucks. Then in december 2013, almost three years into your time as cfo, the l. A. Times published a long article on the relentless pressure wells fargo put on employees to open new accounts, the article was based on a review of internal wells fargo documents, court filings, interviews with more than 30 current and former wells fargo employees. The article specifically said that employees had opened fake accounts. In response to this pressure now you were interviewed for that piece, mr. Sloan, and you said, quote, im not aware of any overbearing sales culture. Hum. That is really interesting phrasing. Im not aware of any problem. So when the l. A. Times came to you and shows 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 . Senator, first, as it relates to my comments in 2011, im proud of the credit card products that we have at wells fargo. Thats not the question im asking. I just asked, you brushed it off, you said im not aware of any problem. Did you open an investigation when someone laid out evidence of fake accounts . Senator, in that interview to the best of my recollection with the l. A. Times they didnt provide me with any information it was soon after that that as i mentioned i take that as a no. Its correct because you did not open an inquiry into it, is that right . Senator, the l. A. Times didnt provide me with any documentation so you have no clue all right. Did you read the article . I read the article, yes. And then you opened an investigation immediately . At the same time the article was coming out that was the time when the Community Bank elevated this issue to the Senior Leadership team and thats the time that we began to take action. Lets talk about that time. You didnt look into the fake accounts but you will went right back to pumping up the stock price by bragging about wells fargos Record Number of new accounts on your very next investor call. Now lets forward to 2016, two months before the fake account scandal became public. You were then the chief operating officer of wells fargo, an interviewer asked you whether the bank had pushed sales goals and cross selling too far and your answer was, quote, no. The fundamental strategy that we have is not going to change. That is july of 2016. Just before this breaks open. According to wells fargos own investigation by july of 2016, you knew that thousands of employees had been fired for opening fake accounts and other sales violations. You knew aggressive cross selling goals were to blame and still you publicly said that the bank didnt have a problem, right . Senator, thats incorrect. You didnt say this . Senator, could you read the entire quote and could we go through the entire presentation because i think in that senator. Your answer was about whether or not you pushed employees too far, your answer was no. The fundamental strategy that we have is not going to change. And thats i was referring to the vision of our company. The vision including the fake scandals you were asked about. Senator, every time i give a presentation i start with our vision which is the ground people in the culture of our company. Which is that our job is to satisfy our customers financial needs and to help them succeed financially. Thats the context that i made that statement. Since ive become ceo ive made fundamental changes to address the issues that were talking about today. Mr. Sloan, you were asked about pressure on employees which caused the fake accounts scandal. We all know that now. Its public. You knew there was a problem and when you were asked about it you lied. This is about personal responsibility. Wells fargo cheated millions of people for years. The Federal Reserve should remove all of the current Board Members who served during the fake account scam. And mr. Sloan, you say youve been making changes at wells fargo for 30 years, but you enabled this fake account scam, you got rich off it and then you tried to cover it up. At best you are an incompetent, at worst you are kplisit and either way you should be fired. Wells fargo needs to start over and that wont happen until the bank rids itself of people like you who let it into this crisis. Thank you, mr. Chairman. Mr. Chairman, could i respond to that . Yes, you may. I want an equal amount of time. Senator, couple things. First, ill get to your criticism of me in a moment but first lets talk about the board. I think the board has taken very important steps in terms of a thorough independent investigation thats been made public. Thats number one. Number two, the board has taken very strong action in terms of exclusive accountability that is unfortunately some of the highest in corporate American History, again unfortunate, so i dont believe that your criticism of the board are accurate. As it relates to me, again, i think the reason that im the right person to run this company today, not withstanding your criticism, is because i have been making change at this company for 30 years. I have made mistakes. I certainly havent been perfect but i think having that knowledge of the company, having the ability to make the change, the actions that ive taken since ive become ceo but i think having that knowledge of the company. Having the ability to make the change. The actions that ive taken since ive become ceo 11 months ago, have made fundamental change at this company, im not afraid to make hard decisions when its needed. And i have the support of 270,000 people. Thats why i think im the right person. Can i just make a short comment on this . I know were over. But you really want to say, are you kidding . Youve been there for 30 years, and every one of my colleagues on both the republican side and the democratic side who have spoken so far, have talked about a broken culture at wells fargo. Have talked about the fact that the problem starts 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. And when you promoted exactly what was wrong with this bank over and over and over, you went to the stock market and you bragged about it, you made money personally off it, when you were asked about it, you did not tell the truth. And you tried to cover it up. Wells fargo is not going to change with you in charge. I ask the senators to Pay Attention to the time limits. I know were not supposed to be in the middle of this we normally get five minutes, im going to go back, i know im on some cases you dont get to respond. You said that basically, as senator warren has indicated, that you wanted to see everybody with a credit card or all of your would you please go in to what you meant by that statement . Sure, were in the banking business, and one of the products we provide to our customers is a credit card. Any one of our customers that comes in to see us, that is interested in a credit card, id like to provide it to them. Im proud of the hard work and effort of all the team members. Weve seen growth in that group because Companies Like using the product. Im not embarrassed about that. Whatever adjectives are used to describe that i may have said or did that are taken out of context, isnt consistent with the fact that our job is to satisfy our customers financial needs. If that financial need means they want a credit card and if we have a broken product would you agree there was a culture at wells fargo . We had fundamental problems that created serious cultural issues. In terms of the rest of the company, there were other issues, but i wouldnt say in the rest of the company it was a broken culture. There are some that dont think i should be in this role. We heard that today, what did it do as it relates to culture. We asked third parties to help us do new culture surveys, even though ive been there for 30 years, ive done things sometimes good and sometimes mistakes, i dont want to be in a position where its just what i think we should be doing. I want to make sure were listening to all of our team members. Were makes fundamental changes in the company to address cultural weaknesses that we have. One area is the military. I want to make sure they have protection. Can you discuss some of the specific ways that wells fargo has tried to improve its compliance can you go into this to assure us that changes have been made with regard to how Service Members are treated with regard to their credit activities . We care about all our customers. But theres no one we care about more than our servicemen and women. The center of excellence is staffed with experts that look the the ways we can provide the appropriate benefits to our servicemen and women. We look closely with the Defense Department to make sure we get on a daily basis, updates from the Defense Department in terms of which servicemen and women. We have had issues, but we needed to make a fundamental change, and make sure theyre looking across the company. In addition to that, im very proud of the fact that we have 8500 team members who were veter veterans. I made a commitment as ceo, we want to hire another 20,000 by 2020. Weve provided Financial Education service to hundreds of thousands of servicemen and wom women. Youve used a third party to come back in and do the analysis on the accounts and so forth, are you going to continue to use the Third Party Company . We werent back and double checked the prior period we had disclosed and expanded that. We but in additional policies and procedures in place right now to be able to address those issues, and those are independent of the business line. Thats the issue we had before. My time has expired. Are you going to continue to use a third party to review, in terms of due diligence, to make sure the changes are being made are actually being implechlted. We are bringing in various third parties across the platform so the answer is yes. The oc c has the authority t revoke the charter of a bank. Why shouldnt the occ consider revoking your charter. Because we provide product the and services to one out of three american households. Weve talked about many mistakes that weve made. But today, more often times than not we do that appropriately. The company is growing, the Company Provides jobs to 270,000 people. So youre too big . No, were not too big at all. Im just reinforcing that every day, we have 270,000 team members that go out and that sounds like what you said. The reason your charter shouldnt be considered for revocati revocation, the first thing out of your mouth was the size. No, the first thing out of my mouth was our customers, we serve one out of every three customers, we take that responsibility seriously. When you look at the bank in totality today, were doing many more things right than we are wrong. I appreciate today were talking about wells fargo one year later, and the changes that i im going to cut you off, i want to go five minutes only. That does sound to me like too big. Well allow the members in the audience to determine whether that is too big to fail. Let me ask you this, explain this to someone back home. You made 21 billion in profits last year, you made a nice salary. I dont want to personalize this, your board makes better than a nice amount of money. You were coo when a lot of this went down. And now youre ceo. So explain to the man on the street why this is fair . Senator, im not 100 sure i know what you mean by this, but let me you get a promotion, i mean, all the people in charge get lots and lots of money. All the lots of consumers get harmed. Explain to me in plain english why this is fair . Ive taken responsibility for the responsibility for the mistakes that have been made at the company. Im taking action in my role as ceo to make wells far grow a better bank than it was a year ago, it will be a better bank in the future. Were taking concrete action, and providing im proud of the fact that our bank is the largest Small Business lender, the largest home lender, we make a difference to americans every day. You deserve the right i only have two more minutes. It occurs to me, its only in financial services, only in this industry where people can make such massive errors, and there doesnt appear to be accountability, and only because of your size do we not understand totally which statutory tools, which regulatory tools, which consumer based tools we have at our disposal to find a remedy. At a briefing for our staff, wells fargo representatives explained the banks would make good will payments to customers whose cars were repossessed. As i understand it, the bank will designate a Third Party Claim administrator, and ask customers to send in a form explaining how they were harmed and how much money they nied to be made hole. According to your representatives, the claims are going to be paid up to 2,000, sort of no questions asked. So then my question is, why not just cut economics up to 2,000 for all of those impacted, because the only reason i can think of, putting the burden on consumers to ask for this good will money that youve already approved, is that youre hoping many of them wont do it. So can i have your commitment to go ahead and presumptively push out the money rather than force people to figure out that they have this right and theyre likely to be approved up to 2,000, but they have to go through the paperwork. Can i have your commitment today . No, you have my commitment, that we are making the 500 good will payment to those customers, whether they were impacted or not, and you have my commitment that we will make it right for those customers to the extent they were impacted. If we need to do more than 2,000 to make it right, we will do that. Can you provide the committee with a list of all legislation that wells fargo has lobbied for or against since 2010 . Well reresponded to whatever inquiry thats my inquiry, if you can respond to the committee. Mr. Tillis. Thank you, mr. Chair. I want to go back and make sure i have the numbers right. There were about 2 1 2 million that appear to be authorized. 8 1 2 million was 65 million accounts open. I think that was about 3 1 2 million unauthorized. Potentially unauthorized, senator. I want to talk more about how you focus on the customer and make this very easy for them to recover for us. I serve on the Veterans Affairs committee. I got a call from a veteran in North Carolina who had his wife was opening the mail and mentioned, i didnt know you were dead. He somehow got miscategorized and thought it was deemed dead. Thought it was a simple problem. Called up the va, the va said, well, you have reams of paperwork and several phone calls youll need to make to get reinstated and get your veterans benefits. Tell me how in getting this right, minimizing the customers time, effect on underlying credit reporting agencies being dealt with too. Is it my problem to deal with maybe clearing up those accounts that i didnt authorize to equifax or the credit agency. We worked out to 43 1 2 million customers, we said, if theres anything about your account that isnt right, come in and see us, and we will make it right by you. About 41,000 have come in to see us. Most of those situations have been resolved with the customer right there. To the extent that theyre not pleased with what we offered, we offer them free Mediation Services, and we address their issues. One of the other fundamental changes that weve made in the Company Since i became ceo is the Customer Service element within our branches. Historically, when a customer came in, we hadnt delegated the ability for a banker or a teller to deal with it on the spot. We say, hey, great, you have an issue, call our 1800 number. That wasnt a good Customer Experience to your point. Under the new leadership of our new head of Community Bank, mary mack. Shes delegated that authority down to the branches, when a customer comes in and they have an issue, were trying to deal with as many of those as we can. Weve increased staffing for our phone bank or Customer Service as well as the customers that come in via online or mobil. Were trying to do a better job i introduced six goals for our team in march. The number one goal is that we want to provide the best Customer Service and advice in the industry. We have work to do senator, i would love to tell you were number one right now, but were not. Queer trying to figure out of the i use the 93 million and 2 million potentially unauthorized, and then a fraction of those that actually incurred fees or charges. Is that correct . Thats correct. For all the other ones, as a selfgoverning matter, i worked in the banking industry. You dont like open up accounts that have no activity, because theres an inherent cost of operations that youre incurring, theres a natural im trying to figure out how where the Circuit Breaker didnt click and whether or not all the those Circuit Breakers in your opinion have been fired. That were now trying to get to the governance issues, that i have confidence you would work on at wells fargo would work on. Tell me more about governance in my remaining 25 seconds. As it relates to governance for the entire company, the board engaged in an independent investigation. Thats been made public. The board made some changes based upon that, in terms of executive accountability, which totaled 180 million of compensation that was not authorized, the board theres a new ceo, thats me. We have an operating committee in which five of the 10 members now have new roles, weve taken the responsibility and the criticism in it the boards independent report that said management didnt provide information to the board in as well as we could have. I completely agree with that, we revamped the way weve done that, theres been a lot of governance changes. Its taken centralizing compliance and making sure we have a conduct office in the risk function to be able to independently look at complaints and ethics lines, questions, and all kinds of things that would indicate we have any issues in the company. I get those reports now, and that wasnt happening a year ago. Senator van hollen . Your response to senator tester about the issue of forced arbitration. Simple question. Who knows best whats in a customers interest, wells fargo or your customer . I think that it frequently is the customer, and thats why thats why its very important from my perspective to get it right so that we dont get if your customer knows best, why do you deny them the ability to go to court . Why do you require your customers to go to mandatory arbitration. We dont do that for all of our products and services. Why do you do it for some of them if your customer knows best . I think many its a simple question, if your customer knows best, why do you require arbitration . Because, most of the independent studies, including the one that was done by the cfpb two years ago indicate its better for the customer if, mr. Chairman, if the customer makes the the customer brings the case, right . If the customer decides its in his or her best interest, forget about studies. We know what they recommended, they recommended we get rid of forced arbitration. You said to senator tester that you were not applying forced arbitration with respect to the fake accounts. Remember that answer . Yes, i did. Theres an article here monday september 17th, 2017, in a case in utah. Wells fargo lawyers have taken the position that the forced arbitration does apply to those fake accounts. Are you aware of that case . Im not aware of that case, senator, i apologize. Let me read to you from a reuters excerpt. They reported, in a motion on monday, lawyers for wells fargo said consumers signed agreements to arbitration disputes when they first opened their accounts at the bank. And those agreements also cover accounts allegedly opened without consent. Thats directly contradicts your testimony, doesnt it . I will look into that if that is true i will look into that matter if that is true, it directly contradicts your testimony to this committee, doesnt it . I will look into that matter. Im not asking you to look into it, im asking you to say, if thats true, doesnt that contradict your testimony. Senator, im not familiar with the facts or the situation, so i cant answer that question. Ill be happy to look into it and respond to you. If its true, it violates it contradicts i dont know if you were sworn in today or not, it violates your earlier testimony, let me ask you about your other Overdraft Fees scandal, when it comes to Overdraft Fee scandals, you are still exercising your right to deny customers the right to go to court. In other words, youre enforcing the arbitration agreement, is that correct . Im not familiar with the overdraft can distal youre referring to. The Overdraft Fees where you were charging you were not you were charging customers fees on overdrafts . Of fake accounts . Senator, we dont we charge customers fees when they overdraw their accounts. But im not familiar with an overdraft scandal. If it relates to any unauthorized accounts, that were potentially unauthorized accounts, that could have been part of that 3. 5 million, to the extent there were any fees charged, we would already reimburse those to the customers, so theyve been made hole . Well, apparently in a case in the 11th Circuit Court of appeals, well follow up with you, but it looks like please. How about the practice where you were selling Auto Insurance to people who didnt ask for it or want it . There was a situation, i think about 500 marylanders or more, about 10,000 marylanders were affected by that, 500 had their cars repossessed. It was the subject of an npr radio story, did you have a chance to hear that story . I didnt, i listen to npr, but i didnt hear that. I would encourage you to do that. Because one of my constituents came out to go to work one morning, his name was michael pfeiffer, he was heading out in february to his job in maryland, to a company that builds guitars. He walked to the place where he parked his car, it wasnt there. He called the police, he thought someone stole his car. Turns out it wasnt a car thief at all, it was wells fargo repossessors. He was flabbergasted because his insurance was current. He went to wells fargo, the folks at the local branch said, this is nuts. Youre covered. It took them, the employees of wells fargo over 2 1 2 hours to connect to folks in the other branch. The question is very simple, if it takes the employees of wells fargo 2 1 2 hours to get in touch with others. If it takes individuals having to fight the system by themselves, dont you understand why it makes sense for people to be able to band together to file their claims against a big company like yours, rather than have to fight you one by one . Senator, what i understand is that if we make a mistake, we need to make it right and improve our processes. What id like, is to the extent that mr. Pfeiffer has not been made hole by us, id like to speak with him personally, to make sure that were handling the situation to his satisfaction. If we made a mistake. I would just point out that you said it yourself, you were informing your customers to know about Class Action Settlements, so they can be made hole. That is the way lots of people can be hole made whole at once. Mr. Pfeiffer is one guy. Fighting wells fargo. I find it amazing you would say your customers come first, and then you deny their choice to seek justice. Senator sloan. Thank you for being here. How many states does wells operate today . In all of them. Are you regulated in every one of those states . How many federal regulators do you have today . Oh, gosh. Occ, Federal Reserve, sec and then in addition, we have securities regulators too. During 2011, 2016, were you supervised by the Federal Reserve . Yes. Did they in their oversight . Im sure they were involved. Did they reveal any material issues . They have, but thats confidential information i cant disclose. Relative to this breach . In terms of the retail accounts . No, they did not. Were you supervised by the occ at this it time . Yes. Did that relate to this situation . Yes, it did. The prior comptroller of the agency has testified to that. Did the cftb come up with anything during the period of time . Not to my knowledge. Are there any outstanding issues today . Oh, sure, absolutely, i have a long to do list. And how is the company reacting to that list of questions. I think that youre implementing too, right . Were making fundamental changes, not only because they make sense. Our regulators believe there are other changes we need to make. Were being very responsive, im sure if they were here, they would say were not moving as quickly as they would like. Which i appreciate that, but our commitment to making, to fixing anything thats broken and making wells fargo the best bank in this country is sacro sankt from my perspective. In a private conversation, theres no way to sugar coat this, its a serious issue. I want to get to the governance issue. You have an internal audit capability inside wells fargo today, correct . Thats correct. Roughly how many people are involved in that internal effort . Hundreds or . Senator, the audit group is actually a separate it reports separate from the finance organization, they have to audit the finance organization. To whom do they report . The chief Auditor Reports to me, but then also to the examination committee. Your board has an external auditor as well . Thats correct. To whom does that external Auditor Report . They report to our shareholders and they also provide independent reports to our board on our Financial Condition on these matters. During this period of time when discussions were occurring . Did the external audit capability disclose any of these maladies. The internal auditors did. I would say that is another area they could have done a better job. And i think david julian has made fundamental changes there. When it was reported to the Senior Leadership team, we should have taken aggressive action. Has any other breach of operation occurred that has not been made public yet . Minor breaches, maybe, that was one of the reasons why we went above and beyond the normal standard of material ailty in our Second Quarter 10q to provide an update on things like cpi, on gap insurance, on hard holds, a variety of different matters. As ive encouraged our team, we need to make sure that were more transparent to our stakeholders than weve ever been. Goingforward, has the scope of the internal audit function and the external audit function been expanded relative to this problem . It has expanded. And its been reorganized to reflect the reorganization weve done within our company. I dont know the answer as to the number of folks from kpmg that cover us today. My guess is, theres more than there was a year ago and the year before. Thank you, mr. Chairman. Thank you, senator. Thank you, mr. Chairman. One of the most important things we can accomplish here is to figure out whether we actually see and have a sense that there is a culture change at wells. I have to tell you, ive been listening to the line of questioning, i think anyone with an open mind would question whether were seeing a culture change. Senator warren asked you about the l. A. Times at the time that this story broke, and we can all acknowledge that the l. A. Times did a huge had a huge role in this. And you sid, well, you didnt have evidence about that, so you didnt really respond to it. But then once it became a bigger scandal, then were going to fix it, so then we find out when we talk about it, were going to fix it. We now realize this is a problem, and theres been mistakes made. And then we find out after the we will fix it, that there was knowledge of this problem years before the l. A. Times story. That that upper management knew about this problem and thought they managed it and fixed it. They didnt fix it. Then you fire employees who created the fake accounts. You also fired those who refused to play the game, we know that happened because they have since participated in public discussions about how they tried to whistle blow on this, and then again when we raised this issue, you say trust us, were fixing it. And they come before this hearing, it wasnt you, mr. Sloan. But come before this body and say, this is all you need to know, we now have turned the corner, and its all going to be okay. Oath then to have this Insurance Scandal exposed. But now we hear were going to fix it. So okay, im like, thats three times, i know a little bit about baseball. It seems like you strike out after three times of promising something you dont see. What i want to say to you, because it goes back to your response to senator warren about the l. A. Times. In the course of just about 15 minutes here, you were told about an overdraft problem in the 11th circuit. Now, if i ran an organization i would know if i were in the 11th circuit with this discussion on overdraft protection. You said you were not familiar. That sounds familiar. Then you were asked about a legal position taken in utah about arbitration, which was in the media. You said, i dont know about that. I would know about that if i were you. I would know about that if i were you. Especially coming before this body. And then a National News story about wells fargo being involved in a wrongful repossession of a car, a news story that literally millions of people listened to, and youre not familiar with it. This is problematic for us, we need to see theres a culture change, theres reaction to these kinds of consumer failures, and we dont really hear it hear. What we hear is dont know, look into it, we really care about the customer. I would assume that where we are right now is a lot of soul searching at the highest ranks, soul searching at the highest ranks of wells fargo, and correct me if im wrong, what i heard you say is, mistakes were made at the Community Bank. I have not heard you say other than taking responsibility for the incentives, i havent heard you say mistakes were made at the highest level of wells fargo. I mean, we can say yes weve lost a ceo and yes, theres been some punishment, and yes were moving over. But the bottom line, i dont hear a level of culture change that satisfies me today. And i think thats something thats very problematic for wells fargo goingforward. Im not familiar is not an answer we should be getting here. It should be yes were aware of it were fixing it. When we only hear were not familiar, we wonder what else were not familiar. I would caution you, when you say, 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 theyre going to do, but i hope you take these comments as constructive. Its not helpful for you to say youre not familiar. Senator, i appreciate your comments. In my opening i was very clear that we take responsibility for the mistakes that weve made. When i say we, i mean me. Im the ceo of this company, the buck stops with me every day. I apologize im not familiar with every matter, but to the extent im not, were going to follow up on all of those. As relates to senator warrens comments, she asked me not if i was about the l. A. Times, she talked specifically about information that the l. A. Times provided and if i took any action. The l. A. Times in that interview, didnt provide me with any information. I cant take action if the l. A. Times 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 enough action. Thats why were making the fundamental changes were making at wells fargo, to make things right for our customers, our team members. Having said that, i completely appreciate your frustration. I am angry about what happened at this company, and i pledge to you that we are not only are we fixing it, but we will fix it. You cannot segregate the top from the bottom. And it seems to me that when you say we, we didnt get any information from the l. A. Times, you shouldnt have had to have information from the l. A. Times, you should have read the story and said, is this true . Lets go find out. And we did. Well, you knew it was true, because you knew about this years before that. No, i didnt. And the board actually conducted an independent investigation where they looked at millions of documents, they interviewed hundreds of people and their conclusion was consistent with what ive said publicly. Here and elsewhere in the last year and that is the issues within the Community Bank were elevated to leadership in late 2013, we should have and could have taken more aggressive action. I apologize for that. When was the l. A. Times story . 2013. I think we have a document going back to 2008. Ill have to hunt it up, i dont have it in front of me. Thank you, mr. Chairman. Thank you for your appearance here today. We talked about challenges to wells fargo stakes because of the mistakes it made last year. One of the quickest ways that businesses can see an impact whenever they make a mistake like this or display poor judgment is simply through competition, your customers can go elsewhere, they can go to another bank. One thing jamie dimon has spoken about is the moat around larger businesses many regulations that washington can impose on them. And gives big businesses less incentive to be responsive. One example of this is Certain Airlines that have mistreated their customers on occasion. Yet, theres very few choices you have if you want to fly from one city to the next. What kind of Market Reaction has wells fargo seen in terms of losing customers or going elsewhere or pressure from other of your big competitors . I think the banking business in the u. S. Is very competitive. They provide customers with lots of opportunities for good products and services. Theres no question that since last september, after the Retail Banking sales issues were announced there was an impact on our business. Since then because of the changes we fundamental changes weve made in the company, were continuing to grow. Year not growing as fast as we were prior to last september, but were on a good trajectory, again, i think thats because weve taken responsibility, weve made changes. Our customers have seen that, and are reacting to that. Were not where we need to be, but were making progress. The controversy over the fake accounts, its amazing to me, how few of them produced revenue. They didnt produce revenue, and the clients didnt know about. I think it was worse than misalignment, i think it was stup stupid. If youre not producing revenue from these accounts. Why were they opened . They were focused on growing the number of accounts as opposed to good products and services, growing relationships, doing it the right way. In hindsight it was just stupid. Youve been on board now for a good bit of time to try to clean up everything. What do you think the risks of possible other misalignments of which youre not aware. I think its relatively low. I cant promise perfection, but ive instructed our team to get as near to it as we can. Hey, were part of these consent orders, you need to look at the incentive compensation structures, as ceo i said, no, were going to go beyond that were going to look at the incentive compensation system throughout the entire company, were not going to do it ourselves, were going to bring in third parties to do it independently, and give reports not only to Senior Management, and give those reports to our board, so were very transparent about it. Im pleased they havent found anything we can never let Something Like this happen again. Weve heard a lot about forced arbitration this morning, in this conversation. This is in response to the Consumer Protection bureaus new arbitration rule. If we allow that to go into effect, we may not have forced arbitration, but we will have forced class action lawsuits. I dont think we should be forcing consumers to fund the lawsuits of class action lawyers. Senator donley . Thank you, mr. Chairman. You just mentioned the buck stops with you, and youre going to make it right by americans, customers and employees. Im concerned by the outsourcing of call center jobs, and i learned that wells fargo has eliminated several hundred jobs in this country recently, and more in recent years at the same time that you were letting these people go, you were adding on positions in the philippines. How is that making it right by your employees here . We employ 270,000 people. 90 of that is here in the u. S. The reason for that, 95 of our revenues, our customers are here. Anywhere between 40,000 and 50,000 people here in the u. S. , we have 15,000 jobs that are open in the u. S. For example, in our Retail Banking business. In september of last year, since i became ceo, more or less, weve hired about 17,000 people, theyre all here in the u. S. Let me ask you this, did you let people go that were working in the call center areas and the people in the philippines have the same position. We want to make sure we are providing our products and services. Thats an easy one. Did you let people go here in the states and add people in the philippines. We did. And generally our track record is that we hire somewhere between 70 and 80 of each of those folks in another job in wells fargo. They generally get a preferential treatment and review, we always have about 15,000 jobs that are open. What happened to the other 20 . Senator, i dont know the exact. Would you make a commitment to figure out how you can get them back on the team . Ill make a commitment that we want to hire as many qualified team members as we, we have 15,000 jobs that are open right now. For those 20 that you talked about that may have been let go, but not rehired, you know, if its not for various other reasons, if they were doing their job right, would you commit to rehiring them . If we in another position. If we have jobs that are open, that theyre qualified for, of course ill commit to th that. Why would you send these jobs to the philippines if they were being done here. It makes sense to have workers throughout the world. So we can have workers throughout the day, and not work a night shift. Do you think people are not capable of working a night shift . No, i dont mean to be critical of anybody that works the night shift at all. Im saying, in terms of how to efficiently and effectively run our business, we want to make sure our people are in the right place. We have over 250,000 team members here in the u. S. I heard that, the buck stops with you. I may be patriotic, and a flag waiver. I stand guilty of both of those. I would put up those folks working against anyone anywhere else in the world. In 2013 you said that you sat on the operating committee, and you saw problems and you were concerned. And it it was around 2015 mr. Stump came to my office and was extolling the culture of the company. If you saw this in 2013, why didnt you stop . Did you know there were fake accounts in your business . No, not in 2013. We should have taken more aggressive example. We should not have ended that incentive Compensation Plan at our retail bank in the Third Quarter of last year, we should have ended it years earlier, we tried to deal with the issue, we dealt with it incrementally, we didnt deal with it comprehensively, for that, we take responsibility. When you saw that in 2013 everyone you said weve got problems here. This isnt working, did you mention that to the board . Did you tell them, we have problems that things are not the way the things that you see are not the way they really are . Senator, my recollection which is consistent with the report the independent investigation that the board did, is that those were escalated to the board in 2014 and 15. I think thats another area where management should have escalated that more quickly. Did you escalet that to the board at the time, saying this is way out of control . It was escalated by a number of Senior Leaders . The board chose not to take action . The board was overseen, the actions that we were taking. We represented that we thought they would address the issues, again, senator in hindsight, we were wrong. It lessened the issue, so that the number of accounts, the number of team members impacted was declining, but thats not how we should have dealt with the issue. The way we should have dealt with the issue is to end it permanently, and we didnt deal with that in our Community Bank until we ended the incentive Compensation Plan and changed management last year. That was a mistake on our part and it wont happen again. Thank you, mr. Chairman. Two senators have asked for a second round. Senator brown and senator warren have asked for a second round. I may choose to do one myself. Thank you. In my opening, i talked about mr. Stumps testimony last year, that this activity was limited to banking. The company lied to this committee and the public. They disclosed they knew in 2016, that customers had Auto Insurance policies added to their loans without their consent. Every day since youve become the head of wells fargo for the last 11 months. Every day, youve made a decision to not disclose this information to the public. Your company knew about the Auto Insurance policy when former ceo mr. Stump testified, when did you first become aware of the force place Auto Insurance policy, and why did you think it was okay to continue covering it up . I dont think it was okay to cover it up, senator brown. When the issue was escalated to me in 2016 in late august, early september. I talked to our team about it, we decided at that point in time to end and tell our vendor to quit providing that insurance to our customers. That was effective at the end of september. We created a group with experts to look at the matter, we brought in an independent law firm and an independent Consulting Firm to help us do a comprehensive and Third Party Review of the remediation. We got the results of their report in the First Quarter of last year, we began to put together the remediation plan and we disclosed that remediation plan in august. And we highlighted that we disclosed the issue in august. We described what our remade yags plan is as it relates to that 570,000 customers. The checks have gun to gone out. We havent been covering up . Well, you didnt let me make one point. We disclosed that to our regulators in the Third Quarter of last year also. That it took you you the company, you personally eight months, you the company, 13 months to disclose such a violation of the public trust is it just makes me incredulous. You said several times at arbitration, arbitration is better for consumers. How have consumers fared in arbitration with wells on the average . I dont have the answer to that. Well, i do. And i have. And im surprised you dont. On average, the cfpb found consumers paid 7700 in arbitration overall, in arbitration cases, other data says that wells customers paid 11,000. So they brought you to arbitration or you brought them to arbitration on the average, consumers dont do very well in arbitration, suggesting that theres something wrong and also suggesting that arbitration seems to work out well for wells fargo, not so well for your customers. Its pretty troubling you continue to dig in and say arbitration is better for customers. Because it clearly is. Can i give you an example of how were changing the company to address i want to respect the chairmans five minutes. One of the issues we disclosed in the 10q was rate lock, rate lock extension fees for our customers. Were not waiting for our customers to want to arbitration, what were doing is we said that and i want to make this very clear, because this is going to come out in the next couple of days, i may as well mention it in front of you all. Were going to our customers and saying the following, if you have a complaint about a rate lock extension fee you paid at wells fargo, we will remediate it. Were going to contact 108,000 customers and say the following. There are some good things youre doing, im not saying youre not. But i am saying on fundamental issues like senator cotton talked about for whatever abo about its not optional arbitration. Its forced arbitration. Right before the scandal broke. Ceo compensation at wells fargo increased from 19 to 21 million. Youll be increasing the minimum pay for tellers from 12 to 13. 50 an hour. 13. 50 to 17 an hour. Its above the federal minimum wage. Well, the federal minimum wage is poverty wage plus. He gets an increase from 19 to 21 million a year, and tellers get a raise. Making them eligible for taxpayer subsidies, to subsidize your employees. You fight class action from employees that didnt pay overtime, it strikes us as hypocritical to be boasting about this minor increase. It matters to them. It does matter. You defend wage theft. Your company is defending wage theft in court, by fighting these overtime claims by your employees. Senator, im very proud of the fact that we raised the base pay for our lowest paid team members. I think thats one of the reasons why our attrition has gone down. Theyre saying were paying them fairly. We provide a burn fits package to those team members that averages between 6,000 and 8,000. We provide other benefits to them. You have my commitment to make sure that those team members are paid in an appropriate way. Thank you, mr. Chairman. Mr. Sloan, since becoming ceo, you said that your priority is rebuilding trust with your employees. At a companywide meeting you told your employees, wells fargos position has never been just about improving our bottom line. You went on to assure them that wells fargo employees were the most important and valuable resource, is that right . Yes, i say that often, senator. Two months after making those comments to your employees, you held an investor day, where you and your team made your pitch to wall Street Investors, and you rolled out a new financial plan, id like to submit a copy of that plan for the record, if i may. Without objection. Thank you. Now, im sure youre familiar with this presentation, mr. Sloan, ive always given you a copy of it too. On pages 26 and 27 of this presentation, you say that wells fargo will cut 4 billion in expenses. 2 billion by the end of 2018. Another 2 billion by the end of 2019. That is a huge cut over just a two year period. Now, heres some of the ways you describe how youre going to achieve those cuts. Im sorry, can i correct one you say . Its not over a two year period, its over about a four year period, thats number one. What we said is that the first 2 billion that were going to be reducing, were going to reinvest back to into the business, so its not going to the bottom line for our shareholders. Let me just quote what you said to the investor. Sure, you said you were going to consolidate activities to provide better quality to scale. Senator can i read this, please. Sure. Improving processes, including Digital Technology to automate manual processes, and outsourcing of certain nondifferentiated capabilities. Now, thats a lot of corporate buzz words, consolidating, automating and outsourcing sounds a lot like firing people. Given your statements about how much you value your employees, can you tell us today that you will not be firing any employees as part of this 4 billion cut . I cannot. Okay. And the reasoning for that is its self we have an obligation to run wells fargo. Thats all i need to know. When i look at the numbers, it looks like to me youre going to end up firing tens of thousands of employees to be able to make these nors. Senator. Compensation and benefits for employees by far are wells fargos expense. Its about 60 of our expenses. Were proud of that. If we sumann 8 cut in those expenses, that means that you would fire more than 20,000 employees in the next few years. And heres the kicker for me, mr. Sloan. After telling your employees in martha they were your most valuable resource, and that wells fargo has never been just about improving our bottom line. I want to read you what wells fargo told wall Street Investors two months later in may. We expect an additional 2 billion in annual expense reductions by the end of 2019. These savings are projected to go to the bottom line. Thats correct, thats what i just said. Youre literally telling wall street youre going to fire thousands of employees. No, we didnt say that. Senator, youre using math to then i do use math. Youre using math inappropriately, senator. Inappropriately . You multiemployed two different numbers and applied it to people. Senator, you applied it to people. I asked you, can you say youre not going to make these cuts by firing people. You were very direct, you said, no, you cant make that promise. I have a responsibility to the 270,000 team members to make sure the company is in existence and successful year after year after year. I have one more thing id like to read from you. And that is, its clear that youre going to knock out a lot of emmoployees here. At the same time youre planning to fire employees, youre promising to spend 11. 5 billion in the next year buying back wells fargo stock. Youve made this public announcement. You have that much extra money. So look, if you stick to your current plan, its clear that wells fargo employees making 30,000, 40,000 a year are going to get screwed, just like they got screwed in the face of account scandals before. It was executives who commanded new accounts be produced at all cost, but it was 5300 front line employees who paid for that with their jobs. And now the fake account scandal has tanked wells fargos reputation, your way of keeping wall Street Investors happy is to slash costs by firing lowlevel employees. You know, what happens in these cases, mr. Chairman, is in these corporate scandals, its almost always the front line workers that pay the price, not the executives. And the only way were ever going to skop these scandals is to hold executives accountable, to fire the people who are responsible. And when they break the law, to march some of them out in handcuffs. Until we do that, these scandals are going to continue and working people are going to continue to take the brunt of it. Thank you, mr. Chairman. Senator, could i respond to that . Yes. As a matter of fact, im going to take my last word as the last question and period here. I am interested in your answer to senator warrens statements and the assertions that she makes. I couldnt disagree more with almost everything senator warren said. I think its inappropriate to take various statements out of context and multiply numbers and then apply them to people, because then what youre saying, youre scaring people. Thats inappropriate. When you look at wells fargo, i said first and foremost, my commitment is to our 270,000 team members to make sure that theyve got a safe place to do business, to serve their customers, that theyre paid fairly. And what those team members are saying to us, even in the midst of the fact that we have said we need to become a more efficient organization, is they like working at the company, because our attrition is down to its lowest levels in years. Thats because they appreciate the fundamental changes that we have made, many of which, but not all of which that we have talked about. We care about our team members. Thats why i spend a lot of my time going out and seeing them and talking to them and understanding how theyre feeling about the company and were making changes based upon what they tell us. Every other month, i told a town hall with 1,000, 2,000, 3,000 team members and ask them unscripted to give us suggestions. We have implemented lots of their suggestions. We care about them. But at the same time, i have an obligation as a ceo of this company to make sure that we keep other stake holders happy. That includes our Share Holders who respect just wall Street Investors, but theyre Share Holders that are Pension Funds that support many retires all across this company. 401 k plans own our stock. We have an obligation to them. So my job as ceo is to balance those appropriately, and im working as hard as i can to accomplish that. Thank you. I want to just let our senators know that if they have additional questions, they are due by next tuesday. And then, mr. Sloan, we generally ask that the witnesses respond to those questions as quickly as they can. Not knowing how extensive those question also be. We cant give a specific timeline to me. If you want to set a deadline to us right now, we would be happy to live up to that. We ask that the questions be responded to within one week from when they are received. We will respond within one week. Without anything further, this hearing is adjourned. Thank you. Adjourned. [inaudible conversations] this weekend on American History tv on cspan3, saturday at 8 00 p. M. Eastern on lectures and history, Sonoma State University professor laura watts discusses the evolution of the National Park system. This was not just a case of setting aside an already natural landscape and leaving it alone, which is again what we tend to think of when we think of park protection. What he was doing was, making nature out of what at the time was mostly old sheep med dose. There is a big grassy area in central park called sheeps meadow and thats why, because there was sheep on it. Sunday at 6 00 p. M. , architect and historic preservationist julie hill on saving slave houses. Slave houses are buildings that are disappearing from the landscape. And so by documenting them, thats one way of preserving them. Documenting them and through my database is also a way to share information and get it out there and learn from them. Then at 7 00 p. M. On oral histories, to continue our series on photojournalists with an interview. End up following a woman named sandy herman who ended up on the front page of the post, yelling at these freshman who were lined up against the call with their chins stuck there like this. Im convinced that story helped American History tv, all weekend, every weekend, only on cspan3. Next, education secretary betsy devos discusses education policy, including School Choice and alternative education options