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tv   House Financial Services Committee on Wells Fargo Business Practices  CSPAN  March 13, 2019 1:23am-5:36am EDT

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c-span3, a confirmation hearing for judges to be on the ninth circuit court of appeals. this is the second time the president has nominated daniel collins and chemically after their nominations expired in the last congress. feinsteinmber dianne and senator kamala harris from california both opposed to the nominees. watch at 10 a.m. eastern. testifying on the trump administration's budget proposal. . >> wells fargo ceo faces bipartisan scolding. the los angeles has wells fargo ceo tim sloan's message of contrition and improvement draws bipartisan review. hill, he told lawmakers about improvements he
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says wells fargo has made in their approach to customer service since becoming ceo. questions from the members of the house financial services committee, citing examples of what they described as consumer abuse and predatory practice. 10s runs four hours and minutes.
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. the committee will come to order. without objection, the chair is authorized to declare a recess of the committee at any time. this hearing is entitled holding megabanks accountable. an examination of wells fargo's pattern of consumer abuses. and i now recognize myself for four minutes to give an opening statement. today we examine wells fargo's egregious pattern of consumer abuses. our witness today is mr. timothy sloan, president and chief executive officer of wells fargo and company. i would like to begin by recounting some of wells fargo's recent harmful actions that we are aware of. between 2011 and 2016 wells fargo fraudulently opened millions of unauthorized accounts, costing their
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customers millions of dollars. in september 2016 the consumer bureau, the office of the comptroller of the currency and the los angeles city attorney imposed a collective $185 million fine. from 2006 to 2016 the bank charged service members illegal fees, failed to disclose their active duty status in eviction proceedings and unlawfully repossessed their vehicles, resulting in a $20 million fine and $10 million returned to service members. from 2005 to 2016 the bank charged customers for automobile insurance policies they did not need, resulting in some customers going into default and losing their vehicles.
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from 2013 to 2017, wells fargo inappropriately charged prospective home loan borrowers fees for extending the period for a mortgage interest rate lock. together, these abuses led to a collective fine of $1.0 billion by the consumer bureau and occ. in 2015 and 2017 the occ and sec respectively found that wells fargo or its subsidiary failed to comply with anti-money laurnding laws. the s.e.c. also unfound from 2009 to 2013 wells fargo advisers unlawfully sold complex financial products to retail investors, reducing their investment returns. recently wells fargo self-reported that between 2010
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and 2018 the bank ee roenzrrone defied or failed to offer modification to customers resulting in over 500 people losing homes. what this longs but kbarpgs list makes clear is that well fargo is a financial institution that creates widespread harm with a broad range of offenses. what's more, this misconduct appears to persist with "the new york times" reporting saturday that wells fargo's employees continue to see internal rule breaking to meet aggressive sales goals. in 2018 the federal reserve board imposed a cap on the bank's growth, remain in place today. but this punishment and the fines imposed have not changed the bank's behavior. and wells fargo continuing to rake in huge profits. also concerning is that wells
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fargo's regulators seem unwilling to take forceful actions against the bank. but instead are weakening dodd-frank safeguards, protecting consumers and the economy from large firms like wells fargo. this includes diluting big bank capital liquidity, leverage and stress testing requirements, and the rules ban on gambling with the taxpayer deposits. in committee will scrutinize what is happening at megabanks like wells fargo and at the regulators who oversee them. wells fargo's ongoing lawlessness and failure to right the ship suggests the bank with approximately $1.9 trillion in assets and serving one in three u.s. household is simply too big to manage. mr. sloan, in committee is putting consumers first and holding financial institutions accountable.
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we will expect you to be forthcoming. and now the chair recognizes the ranking member of the committee, the gentleman from north carolina, mr. mchenry for four minutes for an opening statement. >> well i thank the gentle lady for yielding. for several years now we've been hearing all about all sorts of mismanagement and misconduct with wells fargo. ious jed yesterday we learned the securities and exchange commission is taking new action against your business. each time a scannedland breaks wells fargo promises to get to the bottom and promisedings to maki sure it doesn't happen again. then a few months later we hear about another case of gross mismanagement. another case of the consumer who has been harmed by the baepg's business practices. in fact, since 2016 the bank has entered. >> settlements with every single one of its federal regulators.
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the consumer financial protection bureau, the commodities futures trading commission, the office of comptroller of the currency, the federal reserve, and the securities and exchange commission. the various settlements testimony required the bank to re-mediate commerce harmed. it orders the bank to address internal deficiencies. the bank is still in the process of the complying with the terms of the settlements, two and a half years since the unauthorized account scandal first came to light. and we know several of the consent orders are still active because the bank's inability to develop a sufficient customers remedyiation plans. these are the facts. in october of last year the comptroller of the currentry subpoena joseph otting testified before the banking account that the occ was not comfortable with
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wells's remediation progress to date. meanwhile you announce the bank expected to remain unund the fed's unprecedented asset cap at least until the end of the year. so obviously the bank has a ways to go before the federal reserve is satisfied. furthermore i'm concerned we don't know with certainty how many consumers were affected, what business lines were dplikt implicated and the full extent of the damage. we don't have to a full picture of how many customers were harmed and whether they've been made whole. every single member of in committee has constituents in their state who were impacted by a wells fargo. the bank's behavior has real world consequences. our constituents should be able to trust their own bank. some of them content have access to an alternative.
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we know you've taken steps in the right direction, mr. sloan. some mandated by regulators, actually in fact most regulated by -- insisted by the regulators and others imposed by you and in your two and a half years as chief executive. for example, just three of the ten members of the wells fargo operating committee in place in february of 2016 remain there today. you hired a new chief risk officer and a new chief compliance officer. that progress -- but, you know, that's progress but obviously it hasn't been enough to satisfy your regulators. so i want to use this hearing today to get to your commitment as the leader of in corporation and your commitment that you will do what is necessary to make sure this does not happen again. i want to know more about the
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internal controls you put in place to address the history of gross mismanagement. i want to know specifically how you are changing the culture at wells fargo. these bad acts don't conform with the strong legacy that i know of wachovian first union in my home state. be assured though this is not the the end of the conversation. this is an important hearing and you will hear bipartisan criticism of the actions you have taken and the failures that you have overseen under your watch. i yield back. >> the kmar nchair recognizes te chair of the subcommittee on oversight and investigation for one minute. >> thank you, adam chair. i thank the witness as well. mr. sloan, you became the ceo of wells on october 12, 2016. we need to know what you know
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and when did you know it. here is why. on september 8, 2016, the consumer financial protection bureau issued a consent order which found that from january 1 of 2011 to september 8, 2016, thousands of wells fargo employees opened deposit accounts for existing customers without their consent, submitted credit card applications in the names of customers without their consent, enrolled customers in online banking services, without their consent. requested debit cards for customers, without their consent. the question that we need to have answered is, is there a culture of corruption at wells? i yield back. >> the schar now recognizes the subcommittee ranking member mr. barr for one month.
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>> thank you, adam chairwoman. mr. sloan thank you for being appearing. let me be blunt you're here because wells fargo mistreated and abused commerce. you are operating under consent order and a damaged reputation but wells fargo' reputation is not my chief concern. the bank's actions have given voice to those who want to unfairly taint the reputation of the entire banking sector, including the community bankers who serve the people of central and eastern kentucky with the highest of integrity. your bank's misconduct has fueled the kind of unfair, hyperbollic and anti-bank rhetoric you will hear today which threatens access to capital, job creation and economic growth. today is your chance to convince this committee and our constituents that you are going above and beyond to make things right and bring your bank in line with industry standards to restore not only wells fargo's reputation but the reputations of the vast majority of banks in
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america. who serve their customers with professionalism, integrity and the highest ethical standards. while recognizing you have taken steps to compensate customers harmed, the fed's asset cap is still? place and several consent orders are active and clearly there is more work to do. i look forward to your testimony and yield back. >> i want to welcome to the committee timothy j. sloan, president and chief executive officer of the wells fargo company. mr. sloan has been the chief executive officer of wells fargo and company since october 12th, 2016. and a as its president since november 17th, 2015. mr. sloan, also served as the chief operating officer as wells fargo from november 17, 2015 to october 12th, 2016.
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where he oversaw the community banking division that we will be discussing today. prior to his appointment as president and chief operating officer, mr. sloan held pennsylvania variety of positions at wells fargo, over his 31-year career at the company. including as chief financial officer and leading the company's wholesale banking businesses. without objection, your written statement will be made part of the record. before he begin, i would like to swear the witness in. mr. sloan, please stand and raise your right hand. do you solemnly swear or affirm that the testimony you will give before this committee in the matters now under consideration will be the truth, the we'lle whole truth, and now but the truth, so help you god. >> i do. >> thank you. let the record show that the
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witness answered in the affirmative. mr. sloan, you will have five minutes to summarize your testimony. when you have one minute remaining, a yellow light will appear. at that time i would ask you to wrap up your testimony so we can be respectful of the committee members' time. mr. sloan you are now recognized to present your oral testimony. >> thank you. chairwoman waters. ranking member mchenry and members of the committee. good morning, and thank you for this opportunity to discuss the transformation at wells fargo and the progress we are making to work to become the most customer-focused and innovative wells fargo ever. the past few years has been a very difficult time at wells fargo's storied history. when i became ceo more than two years ago our bank was facing unprecedented and well-deserved scrutiny. i pledged to look back years to examine every business at wells
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fargo to ensure that no similar problems existed anywhere else in the company. we discovered issues that we needed to address. every one of those was a disappointment to me. but when i stepped into this role i promised that accountability and transparency would define our efforts, and they have. above all, wells fargo is committed to making things right for our customers and to earning back the public's trust. we are dedicated to compensating every customer who suffered harm because of our mistake we proactively identify skpers, contact them and compensate them appropriately. for the retail sales practices issue for example we looked back more than 15 years, reviewed 165 million accounts, contacted more than 40 million customers via
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246 million individual communications and have provided tens of millions of dollars in compensation to our customers to date. we are taking responsibility for any fees customers should not have been charged and for related effects such as impacts on credit scores. our guiding principle has been to heir on the side of customers. and we are -- we are taking an overly inclusive approach in doing so. to be sure, getting in right for each customer takes time, longer than i would like, frankly. we make every effort to refund customers for mistakes as soon as we discover them. but mistakes do not affect every customer the same way. we develop processes for taking customer individual circumstances into account to full compensate them. but solving past problems is not enough. we must also prevent new ones
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from developing. our past problems were the product of an old decentralized structure. we have centralized enterprise controls including risk, finance and human resources and have hired impressive new leaders, many from outside the company to oversee them. we have also added more than 3,000 new risk professionals. changes like these enable us to avoid error, identify issues earlier and address them faster. our board of directors has undergone a similar transformation in the past two and a half years we have refreshed the board with seven new independent direct our board chair bestcy buick duke is a federal reserve governor and the first woman to chair a major u.s. financial institution. our corporate culture has substantially improved. team members see this improvement in the elimination of product sales goals that contributed to unthoeshzed
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accounts problem. they see if in the performance eechlgs system that prioritizes serving customers and managing risk. they see it in enhanced leave and increased compensation, including a new $15 per hour minimum wage. they see it in a restricted stock rights granted to approximately 250,000 team members in 2018 to recognize their commitment to the company's future success. and they see it in a corporate culture that encourages team members to speak up without fear of retaliation when they see a problem. by the end of 2018 these and other changes helped us bring our team member voluntary attrition down to the lowest level in six years. all of this enables us to serve the one third of american households who bank with wells fargo. i am proud our customer experience and customer loyalty scores are now at highest levels in the past two and a half years. and especiallily proud that wells fargo is deepening skmimt
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to underserved communities, including a $185 billion in commandments to support african-american and hispanic home ownership. we are using the resources of a big bank to make a big difference. the past few years have reinforced to us that our company does well by doing right. and doing right does not stop with simply repairing harm and rebuilding trust. we have more work to do. and that is an ongoing commitment by all of wells fargo's 260,000 team members starting with me. . to put our customers' needs first to act with honesty and integrity and accountability and troo to strive to be the best bank in america. thank you again for this opportunity and i look forward to your questions. thank you very much. wells fargo's 2018, 10 k reports that in accordance with the
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consumer bureau and occ april 2018 auto insurance and mortgage rate lock consent orders, the bank submitted to the regulators an enterprisewide compliance plan, a plan to enhance the bank's internal audit program and plans to remediate skmrs affected by the matters. according to the consent orders, the required plans are subject to the consumer bureau's and the occ's review and determination of non-pokes. has the occ indicated its non-objection to the bank's compliance audit or customer remedyiation plan sns has the has the consumer bureau indicated its non-objection. >> madam chair i can't respond specifically because that would mean i would be disclosing confidential supervisely
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information shared with us by the occ and cfpbp but i can assure you we are working construct 11 which we are executing on the plan that reflects the fundamental changes i've made since becoming ceo. >> thank you very much. . for those listening i'm simply asking whether or not the bank is in compliance based on reviews that are done by the occ and the consumer bureau. >> we are in compliance with those plans. excuse me. >> thank you. during an october 2nd, 2018 hearing before the senate banking committee, the comptroller of the currency joseph otting testified the occ was not comfortable with wells fargo's remediaten process to date mass the bank disclosed to the status to the investors the plan is submitted. including whether the regulators have raised any objections to the bank's submit the plans? >> again, the we cannot disclose confidential supervisory
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information in terms of the give and take that we have with either the occ or the cfpb but i can assure you we have plans in place. >> thank you very much. on february 2nd, 2018, the federal reserve in response to recent and widespread consumer abuses and other compliance breakdowns issued an order restricting wells fargo's asset growth until it sufficiently improves governance and risk management. in announcing the order, the federal reserve stated that in recent years wells fargo pursued a business strategy that prioritized its overall growth without ensuring appropriate management of all key risks. the firm did not an effective, firmwide risk management framework in place that covered all key risks. this prevented the proper escalation of serious compliance breakdowns to the board of directors. mr. sloan, are you aware of the
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federal reserve's restricting the asset growth of any other large bank holding company under its supervision other than wells fargo. >> no, i'm not. >> okay. given the unprecedented nature of the federal reserve growth restriction which remains in place today, is wells fargo simply too big to manage? >> no, we are not. and i think that the changes that i described in my opening statement in terms fundamentally reorganizing the company, centralizing our risk and control functions. >> thank you very much i only have a few minutes here. in your october 4, 2017 testimony to the senate banking mendota you stated you have the nomg, ability and support to make changes at wells fargo. indeed you testified you've been making change at this company for 30 years, including fundamental change as ceo. since you gave that testimony, federal regulators have announced several enforcement actions relating to customer abuses at wells fargo. the federal reserve in february
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2018 imposed, again, an unprecedented asset froze on the bank. and on and on with all of this experience and the lepgt of time you have been there, the roles that you have played you have not been able to keep wells fargo out of trouble. you keep getting fined. why should wells fargo continue to be the size that it is and should it be downsized? or what else could be done? >> well, i believe that wells fargo serves our 70 million customers one out of three u.s. household in a very effective way today. and i think the way in which we serve our customers is reflective of the changes i've made since becoming ceo, not only in terms of the fundamental changes that i mentioned in addressing past issues, but also in terms of the new customer capability, customer focus. >> thank you very much, mr. sloan. i appreciate that. all the changes that you sfad that you have made are not evident. and you do not have the kind of
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customer satisfaction that you are alluding to. again, is wells fargo too big to manage? with that, i will yield to the gentlemen on my right, mr. mchenry. >> mr. sloan, so i mentioned in my opening statement you are under a -- you've been fined bier one of your federal regulators. you've entered into consent decrees with every one of the federal regulators. so how many consent did he crows total have you entered into? >> it's my count that we have approximately 14 that are open right now. >> fourteen. >> um-hum. >> how many customer accounts are we talking about? >> related to what? >> well, you define it. >> well, it depends on the underlie issue. for the retail sales practices issue, we engaged an outside third party to look at over 165
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million accounts. and what we concluded that there have been but not necessarily were up to 3.57 million accounts opened inappropriately. we reached out to the customers. >> okay. >> and my guess is that once we complete that remediaten the number will be small. >>reporter: when do you plan to keep complete the remedyiation on the 3.5 million customers. >> i'm sorry. >> when did you plan to complete the remedyiation for the 3.8 million customers. >> we completed that remedyiation for those customers. in addition we entered into the settlement of a class action suit and customers have an additional opportunity to be part of that suit. and then once knows payment are made we'll have a better idea. >> so 14 separate consent decrees with the regulators. you talk about confidential supervisory information. that means you have ongoing conversations with your regulators that you can't disclose to us in a public setting.
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understand. understand the law. we constructed that law. we created the regulators. and that means you have ongoing conversations. so let me just ask this broad question. you're the ceo of a marilyn american company. does the buck stop with you. >> absolutely. >> so what are you doing to change your culture and your 2.57 years reign i can hold up accountable if the public your board of directors and shareholders should hold you accountable and are for your actions at ceo. what are you doing to change the skurlt. >> the first thing that we have done or that i did when i took the responsibility as ceo is to take responsibility for our past actions. >> how are you changing that front line culture? the people that my constituents interact with in a branch bank in north carolina? how are you changing that culture those are the ones not north carolina interestingly. but those broadly across your footprint, established rural footprint those are the ones that took the action how are you changing that culture. >> in our retail banking
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business we have change the leadership. all right. we ended the incentive plan that that drove inappropriate behavior. we changed -- we increased the amount of training that we give to team members called change for the better. we have improved the products and services that we have been encouraging them to work with their customers over. and we have also delegated more responsibility for them in terms of resolving customer issues. the feedback that we get. >> i understand the feedback we got it in the written statement. can you give me your personal assurance that this is the end of customer harm. >> i can't promise perfection. but what i can promise you is that the changes that we have implemented. the substantive changes that we have implemented since i became ceo are going to prevent them from occurring as best we can. centralizing our risk and control functions. right it's a fundamental change
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in the company. the way that we get information today is different than we get information the way we hair. >> you've been fined $4 billion. >> i'm sorry. >> you've been fined by the federal regulators $4 billion. do you think that's sufficient or adequate. >> i think that the reputational damage that our -- that our company has endured do you agree because of our mistakes created significant damage to the company. and it's my job as ceo to make sure things change. and they are changing. >> okay. your personal assurance. >> yes. >> you have entered into 14 consent decrees by what you just said publicly. can you give this committee and the public assurance that you will comply with all of those consent decrees on a going forward basis. >> i absolutely will. >> and you'll give your personal attestation that you will follow knows consent did he crows. >> we will -- our team is working very hard to respond to all. >> will you give us that
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assurance that you will follow the letter of the regulators consent did he crow entered into with your bank. >> we will do our absolute best to comply with every provision. >> and is this the end of scandal at wells? are we going to see more headlines coming up? and we're going to have another hearing about in. >> i can't control the media. but. >> are my -- are your customers going to hear more of bad axes taken by your company? >> there is nothing else that i'm aware of that we haven't disclosed and we changed the standard of disclosure at wells fargo after i became ceo. it's not a materiality level of disclosure. it's one of reputation. >> the gentle woman from new york ms. malonely subcommittee chair of entrepreneurship and capital markets is recognized for five minutes.
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>> goerpg and welcome. >> good morning. >> mr. sloan, on page 5 of your testimony unthe heading corporate citizenship, you share -- and i quote -- our commitment to helping address some of the country's most pressing social and economic issues is only growing. end quote. and i'd like to talk to you about your corporate citizenship. and then i went to your website and looked up your environmental, social and governance guide. and it's an impressive list of corporate citizenship policies. to take one example, wells fargo's human rights statement says that your company is committed to respecting human rights and that and i quote, in effort is done with the understanding that in some circumstances we may go above and beyond what the law and industry standards require. end quote.
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does that sound accurate to you yes or no. it does. >> great. now i want to take you back to february 14th, 2018. that was the day a lone gunman opened fire at a high school in parkland, florida, and killed 17 children and staff members. with an ar 15 style semiautomatic rifle. after this horrific massacre, two of your biggest competitor citi bank and bank of america adopted new policies to ensure responsible lending in their businesses with the gun industry. under the citi policy all of the banks business partners in the gun industry must required a background check before they sell a firearm and they must prohibit the sale of firearms to teenagers. these are common sense policies that will increase public safety. and they're also smart business
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decisions. yet when asked about your competitor's new policies a wells fargo spokesman said that progress on these issues had to be made through the legislative process that your company wouldn't go above and beyond what the law roird. but as i read the human cases in some cases your bank does go above and beyond what the law requires. and to make it worse, last october, wells fargo issued a new $40 million line of credit to the manufacturer of the exact gun that was used to kill 17 people in the parkland shooting. so i have two questions for you. first, why does wells fargo continue to put profits over
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people? by financing companies that are making weapons that are literally killing our children and our neighbors? and secondly, why does -- why are you willing to go above and beyond what the law requires on some issues like human rights but not go above and onthe law when it comes to financing the gun industry? how bad does the mass shooting epidemic have to get before you will adopt common sense gun safety policies like other banks have done. >> congresswoman, we don't put profits over people. we bank many industries across this country. we do our best to ensure that all of our customers who we bank follow the laws and regulations that are in place on a local and state and national level.
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my view -- our view is is that we don't it is appropriate. >> my time is almost up. but why are you willing toth above and beyond what the law requires for human rights but not for gun -- for gun safety? why is one more important than the other. >> that isn't the case. we just don't believe that it is a good idea to encourage banks to enforce legislation that doesn't exist. i view that as your responsibility. >> secondly, very quickly, as my time is almost up, as part of a massive scandal uncovered in 2006, the wells fargo defrauded millions of customers by opening more than 3.5 million fake accounts. wells fargo attempted to force its customers whe when they sought justice into arbitration. if investors deserve to seek justice and accountability through the civil justice system, why do you think that
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wells fargo customers don't deserve the same treatment in. >> may he answer, madam chair. >> i'm sorry am i able to answer the request he. >> please take a minute to answer. >> sure. congresswoman, we took your advise you gave my spread sess ner the last hearing. you asked us in the instance of retail sales practices to go beyond a couple of years pap that's why we went back more than 15 years to make sure that we were able to capture all of the potential customers that were harmed. we thought that was a very good idea. and as i mentioned in my opening statement, we have looked at more than 165 million accounts, contracted -- contacted more than 40 million customers through 264 million interactions to make sure that we have made things right for them. and i believe we have. >> okay. thank you.
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>> the gentle woman from missouri vice ranking member is recognized five minutes. >> i thank the chair woman for yielding good morning mr. sloan. >> good morning. >> i want to start pie by expressing my continued anger and frustration that your company was taking advantage of your customers and our constituents for years. you had a responsibility to your customers and placing one's money and wealth in the custody of an organization like wells fargo is one of the bigds display's of the public trust and the company betrayed that trust and took advantage of customers in order to meet sales pormds goals and fraudulently improve earnings and share prices. while you have apologized paid millions and billions in fines and after reviewing your recently released business standards report made numerous changes to your corporate structure, i think we can agree there is still more to be done. the mr. sloan, there were over
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15,000 accounts in missouri affected by misconduct and scandal since 2012. these include many of my constituents whom i represent. i care deeply about these customers. have all of these customers been made whole, sir, and not just for into any fees ka charges but also for related effects such as impact on credit scores and zbluch the answer is yes, by us. and the way that we have done that is by the extensive outreach that i mentioned in my opening statement. and -- >> outreach? outreach, meaning what. >> we looked at 165 million accounts. >> and they have been made whole. and their credit scores have not been impacted. you've made sure of that. >> we have corrected any improper information that we provided to the credit bureaus.
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in addition to reimbursing customers for fees and expenses we have asked them to come in and see us to the extent that they felt like there was additional. >> what percentage came in to see you, zblier a very small percentage came in to see notwithstanding our best efforts to contact everyone. and then to the extent that they weren't satisfied with what our offer was we hired a mediator at our expense on their behalf and we have resolved all of those customers that have come in. in addition, the customers have the ability to take part in the class action settlement agreement that we have entered into where we paid $142. >> i thank you i have limited time. after the scandals that have been brought to light since 2016 wells fargo decided to hire a new chief compliance officer to ensure that the bank is mitigating risk. i'd like to know when that new chief compliance officer was in fact hired.
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and has the new chief compliance officer been empowered to make changes throughout the company? >> he has. mi mike roamer was hired and joined us in january of 2018. >> january of 2018. >> that's correct. >> what was going on between 2016 and then? >> a lot of time before you hired a chief compliance officer, sir. >> that's correct. we had a compliance program in place. it wasn't working as well as i would have liked. we dismissed our -- we asked our prior chief compliance officer to accept aside. and we went out -- i think we hired the best chief compliance officer in the industry who has a nontsed capability. >> did the regulators tell you to get of your chief compliance officer. >> i made that decision. >> um-hum. you your testimony you mentioned wells fargo has worked to address the root causes that allow the issues to occur in the first place.
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mr. sloan, in your opinion, what are the root causes? was there something in your business modland, something in your organizational strug that led to this malfeasance. >> when will i think there were a number of root causes, congress wom. first it was reflective in the decentralized vur where the control functions were part of our businesses as opposed to separate. i've changed that since i've been ceo. i think it was also reflective in our retail banking business in an incentive plan that was much in had an incentive plan that was much too focused on selling products as opposed to providing good service and advice. we have ended that incentive plan and have a new plan in place being received quite well by not only our team members, but also by our customers. that's areflective in the customer service, customer loyalty, customer experience. the feedback we get from our team is those fundamental changes like that are being very
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well received. >> my time is about to expire. i have more questions about risk management and the board. i hope that some of the other colleagues will get to that. i thank you for your testimony. and i yield back. >> thank you. >> thank you very much. the gentleman from california is recognized for five minutes. >> madame chair, i thank you for holding these hearings. this it this hearing is maybe two years later and i'm glad to see when 3.5 million consumers are adversely affected that the financial services committee will take that seriously. this is not a trick question because i told you i would ask it. you heard consumers. we talked about remediation, now it's time to be in the vanguard of consumer protection. you can endorse the bill on
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overdraft protection. this will make sure that overdrafts are reasonable and proportional. that you do not reorder transactions and that no other bank reorders transactions in order to increase the amount of fees that there's notifications at atms, et scetera. i asked your staff to look at the bill to edadvise you. can you be on the right side of history and endorse that bill now? >> uh-uh think we're already on the right side of history because when you look at the changes. >> only your practices affect your bank. you have a powerful lobbying organization in this city. will that be on the right side of history? >> i can tell you what we do. >> i'm asking what your lobbyists will do. not what your banking computers will do. >> with don't have lobbyists that are lobbying on overdraft
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protection. >> your lobbyists don't lobby on bills affecting all of your customers and the bank relationship with them. why do you pay them? >> congressman, what i'd like to do is describe the industry leading changes -- >> no, because it's my time and i asked you about whether you'd support the bill. and you're trying to filibuster by talking about your practices. somebody else may ask you that question. will your lobbying organization, which you have here to lobby on bills relevant to your bank, support this legislation? >> congressman, i have not spoken to our industry trade groups about that bill, but i will speak to them about it. >> so you'll talk about it behind cloudy skised doors. >> i have to go on to the the next question.
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you told the gentleman from missouri that you've tone full remediation. it occurs to me that some people didn't get a house. they just didn't qualify. now that house is worth several hundred thousand dollars more than when they were denied credit. if somebody is in that circumstance, you'll pay for a mediator. but will you enforce the arbitration provision or will you let them go to court if they want to go to court? >> they don't need to go to court. >> if they want to go to court. the courts were established by the u.s. constitution and these other ways of dealing with disputes are fine for those who want them. will you force those people in f they decide that's not what they want. >> congressman, in the situation of the retail sales practices mistakes that we made, our customers don't need to go to court. >> you're smart. they're dumb. you have their interests the at heart.
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they have lawyers. they want the to go to court. and you're telling them they are stupid for wanting to go to court. let's say they want to go to court. will you force them out of course by using the arbitration provisions? >> us don't think your customers are stupid. >> are those customers stupid or are you going to use your clever arbitration provisions applicable to an account they never signed up for in order to keep them out of court if that's what they decide they want? >> congressman, our remediation for customers that restaurant impacted by retail sales practices exist kpeexpensive an kpre hence pivot. >> and you refuse to let people dpo to court and use arbitration provision for the account they did sign up for to keep them out of court with regard to the account they didn't sign up for. then you come becofore congress and say that's wonderful for the consumer. the consumer must be wrong if
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they want to go to court. >> i didn't say that, congressman. >> will you let them go to court if that's what they want? yes or no? >> we have settled -- >> i'm asking for a yes or no. not a filibuster. that's the senate side. yes or no? >> congressman, i have answered your question. >> no, you haven't. i asked you yes or no and you haven't given me an answer. >> we enforce orb trump administration arbitration provisions. >> even for the accounts they didn't sign up for. >> congressman, this had the case of sales practices, we have had an extensive remediation effort. every customer that's come in to see us we have resolved their issue. >> mr. chairman, obviously, mr. sloane is not going to answer your question. >> thank you, madame chair.
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mr. sloane, talking about overdraft fees. does that mean that people who don't balance checks should share the expense of people who do balance dhchecks, am i understanding that right? >> i think customers that overdraw their accounts should be charged a reasonable fee for that. the at wells fargo we tried to live up to the provision of satisfying financial needs and helping them to succeed financially by giving them all the information that we have to be able to manage their financial situation the best. so for example, in may of 2017, we introduced the new capability called realtime balance alert. it's very simple. you tell us what balance you want to know about. when your account hits that balance, we'll push out that information to you. that's saved our customers
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hundreds of millions of dollars in the last year and a half since we introduced that. we push out 43 million realtime balance alerts a month. in addition, we introduced another capability in november of 2017 called overdraft rewind. we find that more likely than not, some of our customers will overdraw their accounts the day before they get paid. if you have a direct deposit into wells fargo on a friday and we know that's happening ask you overdraw the night before, we're not going to charge you that overdraft the next day because you're a customer. you're going to get paid. that's saved ed 2.3 million overdrafts since about a year and a a half ago. i think that they are industry leading. if we have information about customers that can help manage
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finances better and avoid an overdraft, absolutely. but if a customer decides to overdraw their account on their own, they should have to pay a fee for that. >> about how many employees does your bank employ? >> 260,000. >> the topics before us today are complex. i'd like you to simplify some matters and tell the committee the most important lessons that our constituents should draw from the events and violations that brought you before the committee today. >> first and foremost, if you see a problem, deal with it as quickly as you can. that's a lesson learned by us. i think when you see fundamental issue in terms of a company's organization that needs to be dealt with, even if it means making massive change in the company, you need to go ahead and do that. and it also means that if you see leaders that are not living
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up to the standards that you expect for your company, you need to make changes. >> you testified that the sales culture at wells fargo contributed to the violations. was that a culture unique to wells fargo? have you had experience with others during the enforcement process? >> i can't speak for our competitors. i think many competitors have incentive plans. i don't necessarily know whether they were the same or different. i think our incentive plans went off the rates because it focused too much in our retail banking business on selling products opposed to providing the right advice and service. in addition we created a legacy of managers that weren't managing
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managing anymore. they were enforcing incentive plans we have changed all that since i became ceo. that won't happen again. >> what are you doing now to protect your customers from cyber theft? >> we're doing two things. one, we hired a very impressive cyber team and we have cyber threat fusion centers all around the world to monitor cyber risks for the company. we have invested hundreds of millions of dollars by now billions of dollars in cyber security including having third parties come in and provide us with ideas. in addition, we're using artificial intelligence to monitor our customers' accounts. if we see some sort of a transaction that looks odd for that customer like maybe you sending a million dollars to a bank account in a a country you have never had a relationship with, we would try to surface that for the customer.
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there's more to do. i think the biggest risk in american consumers face today is one of imposter fraud. >> thank you. >> the gentleman from new york, the chair of the subcommittee on consumer protection and financial institutions, is recognized for five minutes. >> thank you it, madame chair. mr. sloane, do you realize how serious this set naer you is with wells far fwoe? >> yes, i do, congressman. >> your predecessor when he was before us, i took it he wasn't real serious when we talked about the agree vous greet jous actions. do you realize that if someone on main street caused such hazardous results, whether stealing their money or conning
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them, they go to jail. that's what they do. they fgo to jail. what you have done, your industry, your bank, that you have been a part of for 31 years, no one has paid a punishment at all. people have left. some still received a bonus. people have stayed, as you have, and got promoted. so when the general public looks at this, they do not see any justice at all. nothing. you say that there has been changes. i'm looking at a news report now that just came out last week that says that maybe the
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practices that were utilized on these accounts have shifted to your debt collection procedures where those who are collecting debt going after individuals they have incentives to beat. there for 30 hours and collect $45,000, x amount of money ask one person has been fired. are you aware of that? >> congressman, i'm not familiar with the news report that you're referring to. >> it's dated, the news report ask i'll refer it to you is dated march 9th. it talked about as recently as december there was an employee out of your iowa facilities that said that it's a joke that the
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climate has changed. and they have been fired as a result of this incentive package that was placed on these employees. are you aware of that? >> i'm not aware of that specific circumstances, but what we can report to you is is that's inconsistent with the feedback that we get from our team members who survey information through the interaction that i have with them and our town hall. >> you do your own debt collections? >> i'm sorry? >> wells fargo does their own debt collections? >> in some circumstances, that's correct. >> in that case that those that do their own debt collections are exempt from the protections against harassment that's in the fair debt collection practices act. >> that's inconsistent. we follow the laws and regulations of this country. >> but i understand that if you as your bank, since you don't
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hire someone from the outside to collect your debt, that is subject to the fair debt collections practices act, you are not subject to them. so therefore, the harassment of individuals to get the debt continues on a regular basis. >> harassment has no place in wells fargo today. >> i'm going to refer you to this article on march 9th. it's in "the new york times." i'm running out of time. one other step with you. you would agree if it you're serious, that the egregious actions of wells fargo should have violated the acts. do you agree? >> we have not violated the review. >> you were downgraded by the
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occ from satisfactory to unsatisfactory. correct? >> the ratings that we received understood r the lending task were outstanding. >> you went from outstanding to needs improvement. >> that was because -- >> a double downgrade. >> that's correct. >> wasn't that appropriate? >> i don't believe it was appropriate. >> then you don't get it. if you don't believe a double downgrade was not appropriate when you clearly have admitted all of the fines that you have had, fraudulent account scandal and you don't think a double down b grade is not appropriate, you don't get it then. >> he doesn't get it. the gentleman from missouri is recognized for five minutes. >> thank you, madame chair. mr. sloane, when your predecessor was here previously, i want to remind the committee about history here.
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the initial problems that were disclosed and found by the regulators were actually reported by "los angeles times." and as a result of the regulators dropped the ball on this whole situation and after the fact ran into your bank and found some of the stuff that's going on as a result of these news reports. even after the other regulators went in even later than that. and found out that there was some stuff going on. and then slapped you with a fine. which i think it was appropriate. but my comment at the time is still appropriate for their inadequate and lousy regulation to have been fine d as well. quite frankly, a lot of the problems here if we were regu r regulated properly would have been found in an earlier time would not have risen to this problem it is today ask we wouldn't be here. if they had done their job in trying to provide the right oversight. it's unfortunate that we have a mess on both sides.
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but my question today, i know in your book here discussing the situati situation, you identify some root causes. number two is that you had a decentralized business model that grant too much authority to your community bank senior management teams and defer too much authority to those authorities. so i guess that's part of the culture that needed to be changed. so i'd like for you to describe what you have done differently, how you have changed the culture. have you looked at other banks' business models and changed it according to them or have you reinvented the wheel and have your own unique business model? >> what i have done since i became ceo is that we moved all of the enterprise control functions. the risk team, the human resources team, the compliance team and so on, that used to be
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part of our business lines, we moved them out of the business units. so what i get today, what we get today is a leadership team, what our board sees is a better check and balance in terms of when there's an issue that occurs in a business line, we also have a review from one of the enterprise risk control functions to be able to provide the right check and balance and to be able to provide information in a much different way. that's a fundamental change in our company. many other firms in the financial services industry have also done similar changes. every financial institution is structured differently. most of our businesses here in the u.s., that means we're going to be structured differently than some of our competitors that might be more of an international footprint.
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but i think that fundamental change is really making a difference in terms of how we're dealing with issues today and moving wells fargo forward. it gives me confidence if there would be a retail sales practices issue happening again at wells fargo is very low, if not zero. >> one of the things that i discussed with your predecessor when he was here was he was telling us he changed the culture yet he kept firing 2,000 people a year. i said at some point, you're not changing the culture if you keep firing people. with regards to the retail sales problem you had. so my question is in order to change the culture, you have to change the management and you have to change the way this the employees act and behave. have you gone through any sort of educational process with your lower level people delivering
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services ask the management people to understand the relationship with the customer, selling products and oversight you need to be putting over these people. >> we have done that in a number of ways. it's changing the incentive compensation plan i mentioned earlier. since i became ceo, we made a number of other changes. we set is our standards to our team members with our kmptations are, not only in terms of how they do their jobs every day, but also leadership. we have done the same thing. it's on one sheet of paper. we have changed the incentive plans across the entire company and retrained hundreds of thousands of team members in wells fargo. we staintroduced a new ethics training that actually was required by every one of our team members to be taken by
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february of this year. i'm pleased to say that 99.98% of our team members have taken it. unfortunately, they have to sit through a two-minute video of me describing it, but they have taken it. and i think that's making a fundamental difference in the culture of the company. >> thank you. i yield back. >> the gentleman from missouri is recognized for five minutes. >> thank you, madame chair. and thank you, mr. sloane, for being here. are you aware of the federal reserve are restricting the asset growth of any other large bank holding company under its supervision? >> im a not aware of any public consent or the that's similar to ours in which our balance sheet was capped at the end of 2017. during an october 2018 third quarter earnings call, you
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indicated that wells was planning on operating under the asset cap through the first part of next year. the presentation at the goldman sachs financial services conference, you indicated wells was still planning on operating under the asset caps for the first quarter next year. however, the bank's most recent 10k issued in 2018 states that the company is planning to operate under the asset cap through the end of 2019. why did the the bank's assessment change between december and february? >> because we received some additional feedback from the federal reserve in part of our normal give and take. and based upon that, they
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indicated and i want to be careful because i don't want to disclose confidential information, but they wanted us to make more progress in terms of our required improvements under the order and based upon that. we believe it will take us longer. we have the same goals and objective as the federal reserve does this terms of improving board governance, which is paragraph two of that order and improving compliance and operational risk oversight, which is paragraph throw. i want to go beyond that one of the goals i set for our team is we want to have the best risk management in every one of our risks in the entire industry. >> i want to ask you about that. here in an article yesterday in "the wall street journal," whistleblowers had a financial
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advisers were pushing clients into inappropriate products and were shifting client assets around to generate greater revenue and bonuses. how do you respond to that? is the culture still the same? have you all learned anything? >> we have learned a lot in the past two ask a half years. the changes that i've made since i became ceo are clear in how our team is operating each and every day. the report that you're referring to was one that our board investigated by hiring an outside law firm and in our review did not find any substantiative issues in that group. >> let me ask you this. did the occ previously tors out the bank's chief administrative
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officer? >> i can't comment whether or not she had any sort of interaction with the occ. it's been reported that she received a 15-day letter from the occ. >> did they force out the chief auditor? >> both of those individuals are on administrative leave. >> are you aware the occ is considering whether to force out additional top executives or directors at wells? >> i have had no conversations about that cop topic with the occ. >> so you are not aware of it? >> i have had no conversations with the occ on that topic. >> in your written testimony, you state that fully satisfied
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the requirements set forth in our regulatory consent orders is critically important. if this is true, why is the occ considering the unprecedented step of removing top executives or directors? >> we have had no conversations with the occ on that topic. >> you don't think it's coming? >> i have had no conversations with the occ on that topic. >> okay. i yield back, madame chair. >> thank you, madame chair. mr. sloane, i'm going to try to plow a little new ground here, but i do need to emphasize publicly what i said to you privately. i think the profound disappointment, anger, frustration that so many of us have. i personally know people
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affected on both ends of this. on the front end with the account scandal and the things going on and then also on the remediation side where the pund lumbar has swung back and they had had difficulties potentially having bank deposit boxes being seized and on other things. so this is a management nightmare, but it's a nightmare for the customers that have been affected by this at every level. and i guess i would be remissed to say you better check out the march 9 article from "the new york times" that sounded like it was something that you were not familiar with. there's a number of very specific allegations, but the broad allegation in this is that i have a quote from a tangherlinier in miami who said the teller said that there was,
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quote, a disconnect between corporate and branch officer workers with what's going on. i think you're hearing a repeated theme on culture. and before i head too far down, i want to talk about your bank board makeup a little bit. you mentioned the new chair. you have been with the bank a number of decades. were you uncomfortable with bank actions at the time of when these things were going on? were you uncomfortable with what the previous administration's decision making was? >> congressman, when retail sales practices concerned "the l.a. times" article was brought to my attention, we had a conversation with the then head of our community bank and we also discussed it at our operating committee.
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the then head of our community bank assured us -- >> what were you telling them? >> we were asking whether or not the allegations were correct ask whether or not there was a significant problem. i think the changes that identify made since i've become ceo are going to preen vent a situation like that from developing again because the head of the community bank said i've got this under control, but we didn't have the risk and control since outside of the community bank. >> i think there's a legitimate question here. what's the cull blt in this? and i understand that you as ceo now the ultimately decision making stops with you. also it seems to me with a publicly traded company like this the culpability of the board i'd like you to address what has happened at the board level to changes because we've got a lot of concerns about culture and whether the culture has really changed and whether you're the right person to
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change that culture. but also your job rises and falls on the decisions of the board. and i'd like to know more about what that board makeup looks like to make sure that this is not happening again. because clearly, the occ controller of the currency, it said in october of 2018 that he was not comfortable, i believe is the quote. the remediation progress to date, federal reserve was pointed out by my colleague in december of '18 pointed that out as well. and you had said in your booklet that there's a clear set of behavioral expectations. i want to know what those behavioral expectations are. >> let's start with the board, if that's okay. when i step ped into this role, we separated the role of chairman and the ceo. we have a new chair of our board betsy duke, a former federal
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reserve governor. in the last since i have become ceo, we have seven new board members. >> i'm the only inside board member. so we have added an impressive new set of board members with a diverse board. five members of the board are women and three are -- four, excuse me, are diverse. they bring an incredible set of experiences. we went out and looked for board members that had the experiences of things like cyber security, risk, reputational issues, organizations that we thought would add value to our board. and they are doing a terrific job. in terms of the -- >> the gentleman from georgia is recognized for five minutes.
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>> thank you, chair lady. mr. sloane, it's very, very important that we get to the bottom of this. and i want to ask you a series of questions first. first of all, it is true that wells fargo opened up 1 million fake bank customer accounts, correct? >> we don't know how many accounts were opened up inappropriately. we believe it could be half a million. >> the fact that you answered that and that you don't know gives us an idea of the size of the problem. but in fact, it has been documented that 1.5 million false accounts. now mr. sloane, wells fargo
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employees routinely falsified customers' signatures. is that correct? >> no, it wouldn't be routinely falsified customers' signatures. in certain circumstances they did. it violated our policies ask were dismissed from the company. >> they did. you were accurate there. and your employees doctored paperwork that was designed to help them meet antimoney laundering rules. correct? >> in certain circumstances. >> now, let me ask you this, which gets to the heart of this matter. why i'm asking this.
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this occurred, all these grievances, these terrible things to fake accounts, the signing of customer signatures, they were done in the wells fargo wholesale banking division, correct? yes, yes. this is what's so important, mr. sloane. you were the head of this department. the wholesale banking division was led at that time by you, mr. sloane, before you became this. the whole point of my line of questioning is to say this. you are the best person to help us solve this problem.
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and so i want to ask you "the new york times" did an article i read on saturday and here's what it said. it said in a survey of more than 27,000 employees in the bank's information technology department late last year, they did a survey and the top concern in that survey was hearing from your employees ask they were concerned that they did not have the ability to raise grievances with managers and whether wells fargo conducts its business today.
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with honesty and integrity. so mr. sloane, we got to get to the bottom of this. you're the best person to do it because all these abuses happen under your watch that was at the department. now you have done this survey. let me ask you this. have you or any member of wells fargo's board of directors reviewed the results of this survey? >> of the survey that was referred to in that article? >> yes, 27,000 employees. >> i have reviewed surveys that are much broader than that for each one of the businesses. >> and i looked at that survey. >> but what was your determination of the results of that survey? >> my response to that is that was great feedback to receive from our team. we want to receive feedback like
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that in wells fargo. >> if wells fargo developed a culture of compliance that you're saying, why are your employees still concerned about their ability to raise these grievances with managers? and they are doubtful of the bank's honesty and integrity. >> i don't believe so. >> welcome, mr. sloane. you're not denying that wells fargo had problems in the past with regard to banking? >> no. >> and so since that has been exposed, has wells fargo undertaken reforms to fix the problem? >> we have wp. >> is the problem fixed? >> it's fixed. >> i'm surprised because as you come in and talk to congress, i'm shocked that you're not in an orange suit and a little jail
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cell testifying today. because we can look back and said we had problems as a customer. you have a duty to treat your customers well. not cheat them. but i'm also here not to say wells fargo should be dissolved because you made some mistakes. we should give you a chance to mediate and improve and move forward. and i'm a little frustrated looking at the questions you're getting today. you actually get questions that you can't even answer. you don't get to respond to the questions that are thrown your way. and so i guess i'm a little frustrated as i watch the big screen. it's scandalous that wells fargo made a profit. it seems like some people want you to give interest free loans. when people don't pay them back there should be no consequence for it. frankly, they want them not to lend but some of our post offices to lend.
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socialized banking. i'm going to get to some questions, but i want to thank you to say you're going to follow the law. you have people from new york and california who don't appreciate the second amendment, but in places in the midwest where you do a a lot of business, we actually appreciate the second amendment and the fact that you'll lend consistent with the law. we believe in our constitutional right to bare arms. so i want to thank you for serving the customers in my community who actually appreciate the second amendment opposed to when the others come in and you'll be here in april, they'll get some questions on this side. so i guess walk through the changes that you immediate. >> first, we had to start at the top.
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we made changes at the board level. we separated the role of the ceo and the chair. we have made changes in our leadership taeam. if you look at the leaders that report to me, five are new to the company. they come with incredible experience in their disciplines. four are from within the company, but new in their roles and one is in the same role. in addition, we fundamentally reorganize d the company to et create a better set of check and balances this terms of creating inseptember enterprise risk and control functions. we have hired thousands of new risk professionals, spent billions of dollars in improving our risk as well as investing in technology. we have also addressed and reenforced to our team the 260,000 team members that serve our customers every day. we have said you're important.
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how do we measure that? we made sure that everyone received at least the minimum of $15 an hour. when we did that, we looked at anyone near that same compensation level. we increase d the wages of 86,00 people by over 10%. we made every one of our team members shareholders to make sure their interests were aligned with our shareholders. the reason we did that is when i'm out talking in our branches, this our call centers, our offices talking to our team, i saw a disconnect. we changed that. we changed incentive plans across the company so no longer would they incentivize team members to sell a product. it's provide iing the right customer service and advice. that's the number one goal in this sixes a operational goals i introduced to our team in march of 2017. we want to be the best in customer service and advice. and what we're seeing is a positive reaction. we're seeing our team member
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voluntary down to its lowest level in six years. >> i would just note i've been a customer with your bank for over 22 years. >> thank you. >> and i would note that i have seen a dramatic improvement with the service that theback provides. i want to thank you for that. i would make one other note. >> could you send me the names of your bankers so i could acknowledge their service. i like doing that. >> one other point. when you're getting questions about mediation in regard to letting people litigate in court, that's in one thing. this is about the trial bar. and the money that goes to that side of the aisle, they make big profits after coming after banks like you. it's about contributions and a lobby and the trial bar. it's not about people or customers. it's about money. >> the gentleman b from texas is recognized. . >> thank you, madame chair.
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mr. sloane, cnn reports that the bank admitted to cheating up to 3.5 million people and that you created 3.5 million fake accounts forcing customers into unneeded auto insurance and charging mortgage borrowers undue fees. is it true that this number may be as high as 3.5 million? >> it may be as high as 3.5 million. >> thank you. is it also true that wells fargo has a clawback provision? you understand what clawback is? >> in terms of executive compensation, that's correct. >> long-term performance compensation stock. >> that's correct. our board has enforced that clawback. >> is is it true that the stock
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prices of wells went up because of this 3.5 million fake accounts in some part because of this? >> i don't agree. >> let's assume it did. if it did, and it's true also that 86% of your 2017 salary was in stock s is that th true? 18%. >> that's correct. >> 86% in stock. as a matter of fact, you made 291 times what the median worker made in 2017. is that correct? >> yes. >> median worker made a little more than $60,000. so you made 291 times that, correct? >> that's correct. >> has any portion of your salary been clawed back? >> no portion of my salary. >> excuse me, i must continue. no salary has been clawed back.
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is it true you were over the department where these atrocities manifested themselves? >> i am today as ceo, but i wasn't -- >> what were you doing when these atrocities were taking place? >> from 2011 to 2014, i was the chief financial officer. then i became the head of wholesale banking and then the chief operating officer. so there was a period of time before i became ceo that the community bank reported to me and that's the point in time when i sat down with our head of the community bank and suggested that she was not the right person to continue. >> she reported to you? >> she reported to me for approximately seven months. >> she was reporting to you because she was over this department? >> that's correct. >> so let me just ask you this. does the buck stop with you or does the buck stop with you?
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>> the buck stopped with her. she's no longer with the company. >> it stopped with her because it liyou eliminated her. but where were you? were you above her? >> for seven months, for a short period of time. >> for that short period of time, you took corrective action. >> that's correct. >> again, you made 86% of your salary in stock. that was in 2017. prior to that, you made some portion of your salary in stock. is this true? >> most of my compensation since i have become an executive officer has been in stock. >> so before 2017, 2016, 2015, 2014, how much has been clawed back? >> about $7.5 million. >> how much of this $7.5 million was clawed back at the time this teed of 3.5 million fake
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accounts being opened, how much was clawed back at that time? >> it was clawed back -- the board decided to cut the equity vest that i received for 2016 for these matters. that was the way that the -- >> when did this atrocity start? >> in terms of the retail sales practice issue, it started before then. >> so you did not receive any clawback in years other than the one you call ed to my attention? >> i wasn't responsible for those groups. >> you were a beneficiary. there were times when responsibility is not the gravity of the circumstance.
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you received benefits that you didn't earn so you inflated the stock. 3.5 million accounts. people invested because of the belief that there were 3.5 million accounts. i thank you. i'll yield back. >> the gentleman from kentucky is recognized for five minutes. >> thank you, madame chairwoman. mr. sloane, you have blamed the unauthorized account scandal in part on the incentive plan that focused on product sales rather than customer service. is that correct? >> that's correct. >> wells fargo discontinued that program? >> that's correct. when i stepped into the role as ceo we ended the incentive plan and we introduced a new incentive plan in january of 2017. the important point is incentive plan was not developed the way prior incentive plans were done. it was done with the team basis
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among our business, our legal, our risk and our human resources group. >> that was a big part of the problem as you diagnose it. >> absolutely. >> let me focus, though, on another issue you testified about. that is the bank's decentralized structure, your management structure and the remedial actions you have taken to change that manager structure. can you explain how risk and compliance reporting was previously in a decentralized format. >> the majority of our risk ask compliance team were in each of the business lines. since i have become ceo is we centralized the risk in compliance team creating a much larger corporate risk in
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enterprise group that has 10,000 people this it. that's created a better check and balance. >> is it fair to say all the compliance and the enterprise controls are now reporting directly to the ceo. >> whereas previously during the account scandal, these complian compliance. >> it was more confusing and that created some issues in the risk is centralized corporate risk team was very small. most of the professionals were in the line of business.
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>> you centralized these controls and on march 1st it was reported you hired a risk officer to supervise for risk across all business lines. >> that's correct. >> what is this person's role? >> mandi is responsible for managing all of our enterprise risk and control functions including compliance. >> she reports to me. >> is this the industry standard. >> you have made the reforms to live up to the industry standards on this new management structure. is that fair to say? >> why did it take more than a year under the fed's consent order to permanently fill the new risk officer position?
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>> that took additional months. she's joined us in the sum isser of last year. >> you changed the management structure and so compliance reporting is now centralize d. >> it appears none of these issues that contributed to the account scandal have anything to do with your institution's size. it has to do with your management structure, your culture and obviously, this incentive program. do you agree with that? >> yes. >> so the issue in the institution was not a matter of size. it was a matter of culture, it was a matter of having an
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incentive program that prioritized product sales rather than customer service and it had to do with a deficient management structure. is that fair to say? >> that's a fair summary. >> thank you. i yield back the balance of my time. >> the gentleman from missouri, the chair of the subcommittee on national security, international development and monetary policy is recognized for five minutes. >> thank you, madame chair. thank you for being here, mr. sloane. missouri, r the state from which i come, has an average income of slightly less than $40,000 a year. and according to the tpt of higher education, we have about 250,000 students in two-year and four-year universities or
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schools. so my concern is if wells fargo holds one quarter of all the student checking accounts and it ends up that about half of all fees assessed to children coming from wells fargo, what do you think the cause of it is? i was here for a long time. i was here when we were doing dodd-frank and the aftermath and the credit card companies and colleges that gave kids sandwich and a credit card at enrollment. i think that was dumb. my son was this college and gave him a credit card. it was dumb. you give him a credit card, you
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had it. however, i am concerned about what seems to be a disparity. in the number of students that receive for various reasons some kind of an assessment where fees are assessed for a variety of things. is there an explanation for that? >> congressman, are you referring to the campus card program? >> i should have left my son out of it. but i'm still upset about it. so it's hard for me to get it out so i took advantage of this. however, my point was wells fargo holds one quarter of all student checking accounts. but half of the assessments come
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from wells fargo. >> so we provide a free student checking account to students today and thr some students that buzz of the broad set of product asks services we provide to students that are generally broader than many competitors, some of those capabilities, some of those choices have a cost to it. those are disclosed and students have the option to use those services or not. i will promise to leave our two kids and daughter out of my answer too. >> thank you. i do think we made some repairs on that, but i have a little different take on culture. i think people corrupt culture. i think we created a picture of it that culture is something that come asks grabs people, but people create culture. and culture is what is developed
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by people. so i'm wondering what the bank is doing in terms of bringing in it people who possess the skills, the character, the morality to work in an institution like this. is has human resources process been reshaped at the executive hiring level? what has changed there? >> sure, when we centralized our human resources group, meaning taking it out of all of our business lines or enterprise functions, we created a much -- we hired a new head of human resources from outside the company. david gallery, who was doing a terrific job. what he's done is revamped his
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leadership team and created a much more standard set of processes in terms of expectations for team members, which i mentioned earlier, leadership expectations, management expectations. we have changed our training in terms of including our code of ethics training that i mentioned earlier so there are significant changes that are going on in our human resources group to make sure that we hire the right folks not only at an entry level or a very diverse set of team members, but also at a senior leadership level. leadership level. >> thank you. >> the gentleman from colorado, mr. tifton, is recognized for five minutes. >> thank you, madam chairwoman. mr. sloan, you just commented to my colleague, mr. barb, that you changed how the incentive plan has worked. obviously it was a perverse incentive plan that was driving your employees to sign up people for programs that they did not want to have.
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"the new york times" article which has been referenced several times noted that some of your employees said, we simply changed the incentive plan. how do we come to a conclusion on that discrepancy, have things really changed in terms of how incentives to be able to drive businesses are not going to be impacting employees' decisions maybe in terms of opening new accounts, moving funds for the customers that wells fargo has? >> sure. now, i appreciate the reference to "the new york times" article. we disagree with almost every statement that's made in that "new york times" article. that's patently not true. the new head of our consumer banking group, mary mack, has fundamentally changed how folks are incented in the retail banking business. we have a new plan in place that is over seen by the business and our risk team. there's a risk oversight. the focus is about growing
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relationships over time, and it is about working better as a team. when we survey our team -- around we do that every quarter in terms of getting their feedback as to how -- which we hadn't done historically, but in terms of how they appreciate and like that new incentive plan, they love it. they not only say that, that's how they act in terms of how they think about wells fargo because the team member turnover, which was a significant issue in our retail bank before the changes that i've made since i've become ceo that i've made, was very high. now it is down to its lowest level we can remember. it has gone from the low 30s to the low 20s, which i think is leading in the industry. mary and her team have done incredible work. the statements in "the new york times" are just wrong. >> i appreciate your confidence. comptroller of currency suggested before congress he is uncomfortable with management of the bank at wells fargo. you know, from my experience in
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a small business typically it is from the top down that will achieve some of the outcomes and some of the impact that business will have. what education efforts are you making at wells fargo for your managers that over see the sales in other departments to be able to implement the changes you see the bank needing to make? >> we have an extensive team member training program that applies to everybody in the company, not just entry level team members. generally, even senior leaders, including myself, are required to take anywhere from 10 to 15 different training classes a year. in addition to that, we have changed the number of layers that we have by reducing them so that we have our senior leaders closer to our customers and to our customer-facing team members. i encourage our team to be out with our customers, with our customer-facing team members. i love doing that. that's how i get a lot of the
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information that i use to manage the company, by talking to our team, by taking their feedback. >> well, just to be able to clarify, do you believe that you have a fiduciary responsibility to your customers, to your small business clients as well as a bank, do you have that fiduciary responsibility? >> i have a responsibility to serve our customers according to the rules and regulations of this country and to provide them with the best service and advice that we can, and i take responsibility for that as ceo. >> you know, in terms of some of the remediation that you're trying to be able to do, you said that you pledged to contact 110,000 customers incorrectly charged with the rate lock extension fee for a mortgage. how many have you actually contacted and how many have been made whole? >> all of them, and all of them -- and when we contacted them, we gave them two choices. and that is if they felt based
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on their experience that they were inappropriately charged for rate lock, they would check a box and we would send them a check. if they felt -- and it is their own decision -- that they were appropriately charged for the rate lock, they would check the other box. all of those customers have been remediated. >> how about the 450 service members that were affected by the illegal car repossessions, how many of them have been contacted? >> that should have never contacted to our service men and women. i feel horribly about that. we have remediated all of those service men and women and we fundamentally changed our fcra oversight. we created an fcra center of excellence, and the consent order introduced by the occ has now been lifted on that matter. >> thank you. >> the gentleman from colorado is recognized for five minutes. >> mr. sloan, good morning. >> good the morning. >> thank you for your testimony today. i can say i have been a customer of the bank for 40 years, and --
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>> thank you. >> -- applewood, colorado, the people at that branch have really been excellent. so i'm happy about that. i'm not happy about the 14 consent decrees or the $14 billion or so of settlements that you have, that the bank has entered into. i want to ask you about a specific area. >> sure. >> where i think there's a lot that can be done to continue to remediate your reputation and your customers harms. so it is on guaranteed auto protection, guaranteed asset protection. that's the insurance, the add-on insurance that people had to get to cover the difference between whatever the loan amount was a collision or something like that, to cover the bank. so, you know, you say we are dedicated to compensating every customer who suffered harm because of our mistakes, that's
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your testimony today. >> that's correct. >> i look at the settlement that you entered into with the attorneys general. >> yes. >> and at paragraph 22 it says, wells fargo has agreed to provide refunds of the unearned portion of the cost of gap -- guaranteed auto insurance -- to auto finance customers in certain states whose laws impose refund-related obligations through statutory provision. that's only 11 states. >> that's correct. >> okay. so for the other 39 states and the district of columbia and the territories, what are you doing? >> we're not going to be refunding those customers because that transaction was actually a transaction between the customer and the auto dealer. we were not involved in the customer's decision to buy that insurance. in those -- it was originally nine states, and now 11 states, it was a required and we should
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have had better operational oversight to ensure that when the auto loan was paid off. >> all right. >> that the gap refunds were received by the customer, and those are the customers that we'll be remediating. >> so if there is a gap, if there is a refund due, you're paying it. >> that's correct. >> okay. and you paid at least that in 11 states to these attorneys general? >> no, we're paying it directly to the customer. >> paying it directly to the customer. but you're saying in the other 39 states that wasn't the case? >> that's correct. >> so i understand there is litigation as to this particular issue in california and, you know, really just listening to your testimony today i do want to believe that the bank is looking out to correct the wrongs of the past and move forward in a positive way with its customers in the future. but as i understand it, in that litigation in california, which
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is a class action, you have demanded arbitration so that each individual person has to bring a claim for $100 or $200 against wells fargo. now, that in my opinion, how do you square that we are dedicated to compensating every customer who suffered harm because of our mistakes? >> congressman, again, the transaction that you are describing, which is when an auto customer in dealing with the dealer buys that gap insurance, it is a transaction between the auto customer and the dealer. in 11 states our responsibility was not to impact that decision, our responsibility was to make sure that when the auto loan was paid off the dealer paid the customer back. >> you are saying the transaction was different in those 11 states than in the other 39 states? >> no, the transaction was the
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same. our responsibility in those states was different. had our responsibility been similar -- >> okay. now we're getting to the real point. really in a kind of mgesture yo were going to take care of them, but in these other state your 'going to force them into arbitration. i hope that's not your doing. >> what we're doing, congressman -- >> so you are demanding the arbitration? >> in california we are. >> what about the other 38 states in -- >> i don't believe -- >> i guess what bothers me is that you where taking some positive steps but now you are backing up and saying, you know what, you want that $100, sue me individually or demand
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arbitration. i yield back. >> thank you. the gentleman from texas, mr. williams, is recognized for five minutes. >> thank you, madam chairwoman. when your predecessor testified before the committee in 2016 i was very concerned. companies must be held accountable when they are caught scamming hardworking americans. it seemed as if the only answers he had to questions from this committee was, i do not know. this is unacceptable from the head of one of the largest institutions in the world to have such little knowledge of how his bank was functioning, and i know that wells fargo is still dealing with regulations 'we talked about to try to make up for this massive mistake and in this process of fixing other issues that have been found during this process. you said today you began to err on the side of the consumer. it is not a new concept, but i'm glad you are beginning to do that. with that being said, my colleagues addressed some of the issues i was interested in hearing from you about and i'm glad you had better answers for
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us today than simply, doesn't know, because it is not acceptable from a person in your position, or his either. let me start off with the first question i ask everybody when they come on to this committee, and the question is this, are you a capitalist or a socialist? >> i would put myself in the capitalist camp. >> thank you for that answer. i would like to read you a quote from former president obama when he was questioned about breaking up the big banks in a "new york times" interview. one of the things he said i consistently tried to remind myself during the course of my presidency is that the economy is not an abstraction. it is not something you can redesign, break up and put back together again without consequences. my question to you, sir, is do you agree with the sentiment from former president obama that breaking up the biggest banks is unrealistic? >> i don't think it makes sense to break up the big banks, but i also believe no bank is too big to fail if they don't operate in an appropriate way. >> okay.
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now, wells fargo and some of your competitors have been criticize it for being too bigby members on this committee. some individuals across the aisle think that institutions of your size should be broken up into small entities. if your bank were to be broeng up into a government-mandated size, what would the effect be on innovation, efficiency and access to capital for everyday americans? >> i think it would -- overall it would deteriorate. i think there's a place in this country, and we see it today for community banks, for medium sized banks and for large banks. i think the value that larger banks can bring today is that because of our economies of scale we can invest billions of dollars in technology, in innovation, in services that sometimes our medium size and smaller competitors can't. a good example of that would be real-time balance alert or overdraft rewind or control tower.
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there are a number of products and services that we've been able to introduce because of our economies of scale and the ten billion dollars that we can spend on technology innovation each year. >> okay. i came to congress as a small business owner, a main street guy. i am a car dealer. and i know firsthand how access to capital works -- >> i hope you didn't take offense to my comments about gap insurance. >> i take first hand -- i know about raising capital, i know about taking risks and reaping the rewards, and it is crucial for growing the economy. when some of my colleagues consider making this drastic intervention in such a large portion of the economy, it sounds like a step towards socialism to me. we don't need to look any further than venezuela to see how that would work out. but also some of my colleagues on the other side of the aisle think bank profits are bad.
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we've heard that today. i completely disagree. i think profits are great, and i want you to be profitable and you are and that's a good thing. with that being said, i want profits to be invested back in the community. i want to see wells fargo increasing small business lending. i want to see wells fargo charitable giving going to nonprofits and little league teams and putting money back in the communities they serve. i do not want to see this money going to attorney's fees and fines that are issued by the regulators because of your actions. so my final question is can you elaborate on how you are investing your profits back into the communities all across this country? >> well, first i am pro little league. i used to be a little league coach, and we are very focused in wells fargo on reinvesting back in our communities. the way that we talk about it is we don't believe we can be successful as a company unless the communities that we do business are successful. that's why i have set a goal for
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our company to be the most generous company in the industry, and if you look at the results from 2017 we were the second most philanthropic company in this country. in addition, i set a new goal for our team, and that is that 2% of our after-tax profits will be reinvested through our foundation -- >> the gentleman from illinois is recognized for five minutes. >> thank you for your testimony. >> mr. foster. mr. williams, if you want to describe what the other side of the aisle is saying, you need to get it right. mr. foster, you are recognized for five minutes. >> thank you, madam chairman. chairwoman. in your sri nivery nice brochur provided us with, you have a section on promoting diversity and inclusion that includes a box indicating 44% of the u.s. workforce is ethnically and racially diverse, 57% is women,
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and so on, military veterans. i was wondering can you provide approximately right now or in detail for the record what the breakdown would look like as a function of job classification and salary? >> i don't have the detail in front of me in terms of the job classification at the company, but i can tell you -- or i can provide you an indication of what it looks like in our leadership team. so in our current leadership team, over 40% are women and over 20% are diverse. >> yes, so my interest would be seeing through the range of job rank, because the bulk of employees are sort of intermediate levels and it would be interesting to see how the diversity plays out. do you normally report that sort of information to any of your regulators? >> we do. >> you do? okay. so that the regulators at least have a uniform view of that? >> yes, we report it internally. we reported it to our board and
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we reported it to our regulators. >> all right. so i would be very interested in seeing -- if you could give us a copy of what you report so we can understand and appreciate. similarly, you have been talking a lot about how you changed the compensation of things to hopefully avoid the sort of problems you have been facing. can you give us rough numbers of what fraction of the compensation today is purely hourly and salary based, what is based on both sales and indirect sales? for example, if your unit sold a lot, then everyone in the unit gets a bonus, what fraction is based on customer experience or customer satisfaction and what that metric might be? >> sure. we have a number of different incentive plans across the company. maybe what i could do is focus on our retail banking business, which has been the topic of a lot of the conversation today. so if you look at the changes that we made in our retail banking business and you look at the entire group, which is about 100,000 people, that would also include phone bankers and phone centers and the like, about 92%
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of their compensation is in the form of salary and the remainder is in the form of bonus. about half of that bonus would be related to risk, and then the other half would be a mix of customer service and advice, loyalty, customer experience, things like that. and then another portion would be related to growing relationships over time, not selling products. >> by risk, you mean risk in the sense of having, you know, your capital position blow up or risk -- >> oh, no, i'm sorry. >> -- or caught doing something -- >> no, that's where my oversight comes in or that affects me. in terms of folks in our business, the risk that they control. so, for example, it would be making sure that they disclose products and services to the customers -- >> at the risk of getting -- >> that they're responsible for, that's right. >> at the retail banking level. okay. i guess that was the main question here.
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i yield back the balance of my time. i yield back the balance of my time. >> thank you. the gentleman from arizona, mr. hill, is recognized for five minutes. >> arkansas, madam chair. thank you, madam chair. thank you, mr. sloan, for appearing before the committee today. i want to start out by just commenting that when your predecessor was here in 2016, as somebody that i spent my career on and off for 35 years in the community banking business, and i just want to express to you the same thing i expressed to your predecessor which is severe dispintme dispointment in the disconnect that he appeared to have at the committee. i really agree with my friend, mr. williams, as a former business guy as well that the lack of engagement that he demonstrated was severely disappointing. that comes from the fact in the 1990s when it came to norwest, it was a company that all of us
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in community banking benchmarked against, including standards of customer ser vivice and success. so personally disappointing and then professionally as well. when he was here, it was said that 900 arkansas accounts was affected. we don't have a big retail presence by wells fargo in arkansas. in the materials you september out it is 60% higher, 1,445 accounts, so it is surprising it is up that much. i hope that all of these issues are resolved and that people are treated fairly in all of these settlements. i was looking at some comments made by your largest shareholder, warren buffett, and he made a comment about wells farg oechlt fargo. he says, talking about the long earning power of wells fargo, he said you can't take away their customer base, it grows quarter
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by quarter and what you make money off of is customers, and you make money of customers by having a hell of a spread on customers and not doing anything really dumb, and that's what they, wells fargo, really do t but when asked as a follow-up he said a couple of years later, they made one mistake, incentives work and they came up with improper incentives that rewarded bad behavior. so what i want to talk about is that. you say you changed your incentive system, which is at the heart of the issue, whether we are talking about the mortgage bank or the wealth management group or the consumer bank. what is your use of independent secret shoppers at all of your locations nationwide? how much money do you spend on it? you have an independent third party doing that, i presume, in addition to any internal audit.
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tell me about that. >> so we do two things in our retail bank to check how our team is responding to customer needs and desires. one is we have independently collected customer service and customer loyalty scores and we do that on a weekly basis. >> i don't want to interrupt you, but i wanted -- >> we have a mystery shopper. >> i wanted to know the mystery shopper, how often are they in your branchs monthly? how big is that? >> we have tens of thousands of mystery shopper visits on a -- excuse me. i apologize. on an annual basis. sorry. on an annual basis. i do not know how much we spend on it, but i know -- >> was that a big change from prior management. >> it is. >> like on an order of magnitude of 100% better or 10% better. >> it didn't exist before now.
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>> didn't exist. so you didn't use mystery shopping as a standard banking practice? >> not -- we may have used it from time -- >> periodically? >> not on a consistent basis and not to the extend we do today. >> i know it is a major change. i know mr. green mentioned that before in this committee. really i don't know a bank of any size that doesn't mystery shop its consumers. i also was pleased you said that materially -- >> by the way, i personally mystery shop at our branches, too. when i visit one of our branches, i don't let them coming. sometimes they recognize me, sometimes they don't. it is better when they don't because i get an understanding how our team is interacting with our customers. i call our phone centers and don't announce -- >> would you follow up with me and give me more information on the scope of your mystery shopping program. i will conclude, madam chair, with buffet's testimony before the congress in 1991. if you lose money for the firm by bad decisions i will be very
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understanding. if you lose reputation for the phone, i will be ruthless. i urge you to be ruthless, mr. sloan. >> i have had that conversation with mr. sloan. >> thank you. i apologize for assigning you to the wrong state. >> i have no interest in arizona, madam. >> thank you. the gentleman from washington is recognized for five minutes. >> thank you, madam chair. thank you, mr. sloan, for being here today. others have already pointed out the most recent cra exam, the result for which, no other way to put it, was terrible. by my count there were at least ten separate consumer protection violations called out. i would like to mention them. violations of the fair housing act, equal credit opportunity act in mortgage lending. violations of the ftc act in mortgage lending. violation of the consumer financial protection act in the retail banking division. violations of the service member
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civil relief act in the mortgage services division. violations of the service members civil relief act in auto lending. violations of the ftc act in credit cards. violations of the consumer financial protection act in student loans. violations of the real estate settlement procedures act in mortgage lending. violations of fair housing act in mortgage lending. violations of the national housing act in mortgage servicing. in addition, there were two other long-running abuses that wells has entered into a consent order since the report citing these violations was completed. those include violations of the consumer financial protection act in mortgage lending and violations of the consumer protection act in auto lending. that constitutes a major consumer protection violation, a
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major consumer protection law in nearly ever consumer-facing division of the company. and in explaining the failing grade that you got on the cra exam, the occ called this -- and i quote -- an extensive and pervasive pattern and practice of violations across multiple lines of business within the bank. some of your large competitors were also downgraded, sir, on their cra exams for consumer protection violations, but i couldn't find one, not one with more than three compared to your twelve 12. so if i'm understanding correctly what you have attempted to do to reyamediate this was to start at the top and reorganize by making changes, you mentioned changes in the board, changes in the ten direct reports. you credit your incentive
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system, may i just affirm that, what you incentivize you get more you, and you have senior management with eyes on potential abuses. it seems to me however, sir, that you are essentially trying to have it both ways. what i mean by that is the very argument that centralizing this reporting does imply all of those changes at the top may in and of themselves have been good, but these weren't the people responsible because they didn't have eyes on this activity. so we have to change the reporting system. and at the end of the day, given the pervasiveness of this it seems to me a couple of things are obvious. either there was unbelievable -- unbelievable corruption or unbelievable incompetence or both. it is corrupt if people saw it and didn't do anything about it.
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it is incompetent if they didn't know it was going on. yet what you have offered today is that the changes that have been made mostly affected the people that didn't have eyes on it. perhaps that was a structural systemic practice that needed to be changed, now brought more into line with industry practices -- good on you for that -- but the fact of the matter is that at a lower level among your approximately 60 community banking -- regional banking people, for example, not all of whom have been changed by a long shot, they either knew it and didn't speak up or didn't know it and it was their job to know it. at the end of the day as well, i guess i would suggest to you frankly that the structural changes in this evolution of wells fargo isn't what needs to
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occur. you don't need to evolve. you need to be reborn, and that rebirth, i respectfully suggest to you, has to reach into the ranks of those who either didn't know it and should have or knew it and were corrupt, and in either cases a deeper pattern of change among the people that my esteemed colleague, mr. cleaver, suggested to you are the ones that bring values and integrity and character to your culture. i guess i'm out of time. i yield back, madam chair. >> thank you. the gentleman from new york, mr. zeldin, is recognized for five minutes. >> thank you. i want to follow up on an exchange you had with mr. tipton with regards to "the new york times" story. is it your position nothing in that story is accurate? >> oh, it may be that some of the individual team members said those things, and i can't say
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that every one of our 260,000 members -- >> thank you -- but i think in terms of the assertions we disagree with every one of those. >> okay. so let's follow up then with more specifics. wellsy kinard worked for wells fargo and quit in january in. >> she may have. i'm not familiar with that team member. >> the story states and it has been reported that wells fargo would steer clients towards investments that would generate recurring fees for the bank, including in a case where it was in the client's best interest. she sent a letter to her clients announcing she would be teaming with another wells fargo employee to handle their account. the letter staysed she was still at wells fargo and she endorsed another employee. is that true? >> i'm not familiar with that situation. >> okay. it has been reported wells fargo spokesmen have confirmed that has, in fact, happened. are you aware of this being a larger problem? >> no, i'm not, and we have
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looked -- we have looked at that issue apart and separate from that situation very closely. >> you can assure us that this is a unique occurrence of a former employee having a letter like this sent on behalf of wells fargo? >> i can assure you that our team that works with our clients and wells fargo advisers in any of our well alth management or investment bank works hard to follow the rules and regulations they're supposed to follow. >> but you can't -- >> -- the feedback we have from our risk teams that over see that unit. >> you can't assure us there haven't been other letters like this sent out? >> there may have. i'm not aware of any. >> mr. tipton asked you do you have a fiduciary duty to your clients. you did not answer yes. you gave a different answer. do you have a fiduciary duty to your clients? >> well, in certain businesses -- fiduciary is a
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legal term. in certain businesses there is a fiduciary responsibility, such as in our wealth advisory business. in other businesses there's not a fiduciary business, and in those businesses we use the standard of doing the right thing for our customers and making sure we provide them with the right services and products. >> thank you for adding additional contempt to mr. tipton's question. i want to get into the situation with veterans. i was actually deployed myself to iraq during this window. i am a wells fargo customer myself, and can you just briefly sum up -- not generally, but briefly sum up specifically what wells fargo did to wrong our veterans? >> sure. we had a system in place that we've changed since i have become ceo in which each one of our business lines was responsible for complying with the fcra responsibilities, which
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we take very seriously. but, unfortunately, we didn't have a standard set of rules and oversight in place. the changes that we've made is that we've centralized -- >> i'm not asking about the changes. what did you do to wrong the veterans specifically? >> in circumstances -- >> and real quick. we're short on time. >> in circumstances where we did not know they had been deployed, we may -- we had not given them their full rights under the fcra act. >> okay, occ -- then i will just sum up, that you're charging service members higher rates on certain loans than were allowed, you weren't disclosing the service members were on active duty status to courts when they were facing eviction proceedings, repossessing service members' vehicles without first obtaining a court order. these are some of those specifics. i would assume you would say that wells fargo knew it was doing these things as it was doing them, correct? >> i don't think we always knew
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that. part of the reason was we didn't necessarily have updated information from the department of defense. >> i mean you were repossessing a service members' vehicle without a corurt order. you didn't know you didn't have a court order? >> we may not have known at that time they were deployed. that's why we're created this scra center of excellence so we get up to date, multiple times a day, updates from the department defense. we would have that group look at it before any sort of action, and it is done on a frequent basis. and our defect rate today is zero. >> i appreciate you doing what you can to address this. it is very important, but i'm concerned that your regret was that you were doing it -- that -- >> it should never have happened. >> that you got caught, not that you were doing it in the first place. there should have been better systems in place when our veterans were deployed. i yield back. >> i completely agree with you. >> the gentleman from florida,
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mr. larsen, is recognized for five minutes. >> thank you. good afternoon, mr. sloan. thanks for coming before this committee. >> good afternoon. >> the chairwoman and the ranking member from the minority party has really set protocol, and i would like to commend you for all of the questions that you have answered here today. in walking away from this committee, i would like for you to just tell me for -- we know what the situation is based on what we've heard here. what other five or six things that need to be recapped again that wells fargo under your leadership has done to correct the financial crisis that was taking place over the last two years? >> so, first we changed the leadership team. second, we've changed and
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reorganized the company. third, we've changed our incentive perhaps, not only in our retail banking business but we had a look across the entire company related to that. this is still part of number three. we've created a better check and balance in terms of the oversight of those incentive plans by our risk and human resources group. excuse me. i think a fourth, we've changed the way that we compensate team members including raising the minimum wage as well as making sure that they had the right benefits, and we've made them all shareholders. and then, fifth, we have changed the way that we communicate to our team members, including -- including to encourage them to raise their hand if there's any concerns that they have, that they see that are going about in the company. >> okay. in reference to, which i had an opportunity to look at "the new york times" article and i heard
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your statement in relation to it, and oftentimes it could be considered as fake news, you know, so many things -- >> i just said it was inaccurate. >> yeah, okay. well, it was inaccurate from your standpoint. the other thing i would ask you, which is extremely important to me because i have a lot of students in the area, the student debt crisis have impacted more americans than any other consumer issue. private lenders have placed skyrocket interest rates on student loans with loan conditions buried in pages of legalistic language. what is your company doing to lower rates in the private market, whether it is appropriate, and to provide more transparency in terms of conditions of the loans? >> our student loan business is relatively small, and we -- we
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generally do not make a loan to a student unless there is a co-signer or a guarantor. however, we are working on a program that we're going to be introducing this year to allow non-wells fargo customers or wells fargo customers with other student loans to consolidate those loans, and then receive a lower rate. >> okay. and one other thing you mentioned about the diversity that you have and you spoke about another. women has been added to the staff. has any african-american been involved in that diversity issues? >> yes. i don't have any african-americans that report to me directly, but if you look at the next level of leadership in the country -- company, excuse me, that is about 100 people, there there is a significant number of african-americans including bev anderson who runs our credit card business, including t.d.
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cole that runs the operations for our retail business. >> thank you. just before my time runs out you mentioned about the veterans. i have a large number of veterans, retired veterans in the jacksonville area, the largest in the state of florida, and you all are continuing to work on that issue in reference to the problem that they had with the crisis, right? >> correct. >> with that, madam chair, i yield back. >> thank you. mr. davidson, the gentleman from ohio, is recognized for five minutes. >> thank you, madam chairwoman. thank you, mr. sloan, to your presence and clearly some thorough preparation. i have a question. do you consider any crimes to have been committed? >> no. >> no crimes? so that would explain why no one has been charged with criminal fraud? >> that's correct. >> so when tellers from time to time or other people who are employed, you know, literally
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hundreds of thousands people employed by wells fargo commit crimes of theft, whether it is from wells fargo or from wells fargo customers, have any of them ever been charged with theft? >> they may have. to the extent that we find anyone that has violated the code of ethics in a situation like that, our responsibilities are, one, to fire them, which we do, and then, two, to file a suspicious activity report with the federal authorities. >> so, in fact, there have been prosecutions and convictions of people who have stolen money from wells fargo and from wells fargo clients, in one case $185,000 from a homeless man. and so it is curious to me that as these acts of fraud were perpetrated that none of them violated a criminal statute in any of the states. >> again, i misunderstood your initial question. as it relates to individual
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circumstances like that, that may have occurred. >> okay. right. and so in this case, aside from some of these folks no longer worki working for the company, are you aware of any ongoing investigation involving criminal conduct by employees of wells fargo in these scandals? >> there are a number of investigations that are going on in terms of by federal agencies regarding wells fargo. i can't comment on anything beyond what we have disclosed in our 10k and 10q. >> so as encouraging as it is to hear some of the progress that's been made, with the change of leadership, with the change in the org chart, changes in terms of initiatives to try to impact and steer the culture in a different way, i think for a lot of people they're going to feel justice hasn't really been served, that there really are two standards where employees of
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a big bank like wells fargo who steal in one case are held criminally responsible and in another case where clearly it was designed to meet performance criteria or to help the firm, well, there's no accountability. maybe they lost their job, maybe they didn't get their bonus, but there's no one in jail, and customers truly do have a property right in their credit score. you're reimbursing them because they have had financial harm impacted -- financial impact. they've had something taken from them and wells fargo is making them whole. but the person that took it from them is not being prosecuted, and so i -- i feel like that is a highlight, not just for us here but it is also something that might merit some attention by state -- by states and municipalities around the country. as you've highlighted, state law
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is important because you're handling cases differently with respect to gap insurance, for example. so i hope we move forward on that. i am encouraged not just by the structural changes but by the investments that even predate this in innovation. so in 2015 wells fargo launched an innovation center, and i wonder if you could tell me, without divulging company secrets, some of the promising things that might help with financial technology, better position wells fargo but also better protect wells fargo customers. >> so i'll give you two examples. one is that in and around our innovation group we've developed artificial intelligence capabilities to be able to scan various transactions, particularly for shamall businesses and commercial customers to look for anomalies in transactions, and if things don't look right we would notify
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the customer. on the consumer side, it would be our new green house account in relationship. it is a mobile relationship focused on students and customers that -- potential customers, the under bank, that haven't been able to be customers. >> okay. >> what it allows them to do is have an all mobile relationship. >> thank you for the highlight on the all mobile. as we look at jp morgan just launched and the token economy, perhaps look forward to more information on that going public if you have one in the offering. my time has expired and i yield. >> thank you. the gentle woman from michigan, ms. talib, is recognized for five minutes. >> thank you, madam chairwoman. my 13-year-old boy the other day was like why, why say socialism or capitalism, why not people-ism and i thought it was genius. in that spirit, mr. sloan, i want to address some of the
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scams that your bank launched on our people. you know, so many people are using the words consumer abuses, scandals, but if you look at the definition of scams they're fraudulent acts, intentional fraudulent acts. only five months ago, mr. sloan, wells fargo reported an internal investigation had thus far revealed erroneously denied or did not offer loan modification to 870 customers due to an underwriting software error. are you familiar with that? >> i am. >> according to wells fargo, your bank, the bank foreclosed on 545 of these customers based on that error. who is held accountable for that? >> so the issue that occurred as you described, congresswoman -- >> no, no, we don't need to know. we know it is an error, right, mr. sloan? >> uh-huh. >> you're the boss. what happened? these are 545 people. they didn't lose a boat, they lost their home. woo are you doing to help them? >> well, the first thing we have done is we reached out to each
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one of them. we sent them a $15,000 check, which is 2 1/2 times the standard that was set in the mortgage services settlement, and then we're asking them to come back -- come to see us. and if there was additional harm that was done to them, we will make it right. >> mr. sloan, the additional harm -- and i can tell you this from my district -- their credit scores, their consumer report, it is the access now to not only housing and loans, you know this, to employment. i have young people that can't even get into the military -- i mean there's all of these things that are tied to it. car insurance, everything is tied to consumer reports. how do you address that? i mean those are things that are really -- you know, i want to mention that, i have other questions that are really important. >> if i could answer that question. >> yes, go ahead. >> because i think it is a very important one. that is why we're working very closely in terms of remediating those customers. so we sent those customers a check for $15,000, which as i mentioned is 2 1/2 times the
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standard set in the service -- >> the credit bureau needs to know of your mistake as well. >> what we're also doing is asking them to come in and see us and tell us what additional harm, if any -- >> but, mr. sloan, they may not know what those additional harms are. i want you to know. >> we centralized a team that's interacting with those customers that has experience in dealing with the issues that you just described, because i agree there could have been additional harm that could have affected credit scores. >> and no offense, i know it is an internal investigation that you did, but i doubt it is only 545. now, mr. slope, last week the michigan attorney general, our attorney general, dana nessle, announced debt collection was one of the top consumer complaints her officer received in 2018. so far nearly half of the complaints were for reporting and selection. in that context, they're required to place 375 calls per day. how can those consumers expect
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to receive a good experience, but also enough time to help solve their problem? >> you know, i can't confirm that we have a minimum standard of 375 -- >> that's the quota, yes. >> -- a day. >> okay. i would love to follow -- if you can follow up and find out if you have a quota. >> no, i think we have expectations -- >> no, i know i am new here. but, madam chairwoman, i think you have to submit it within a period of time the answer to that question. go back, talk to your team, i would love the answer to that. really quickly, there have been a number of claims, as a civil rights attorney in detroit, i can tell you one of the claims of targeting black and latino communities. there have been a number of lawsuits, not only in california and madam chairwoman's state as well as philadelphia and others. some of the things were really disturbing, a former wells fargo employee said they were instructed to offer lender credits to borrowers in
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minorities neighborhoods. another loan officer said they were likely to charge, and this was intentional, a higher rate to borrowers with mexican names. was that some sort of like internal memo going around saying this is -- if somebody is black or latino, this is how you approach them with higher rates and higher -- >> none of that is true. >> okay. >> no institution in this country has done more for diverse communities than wells fargo. >> yes. >> we have $185 billion commitment, hispanic -- >> yeah, i saw that. i know, mr. sloan, but the data is there. i don't think these wells fargo employees -- but lastly, madam chairwoman, i would like -- and i didn't have time, but i would like to issue for the record this study that reveals the way racial discrimination is embedded within the --
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>> without objection it is entered. >> thank you. >> the gentleman from north carolina, mr. budd, is recognized for five minutes. >> thank you, madam chair. thank you, mr. sloan, for joining us, for your time here early this afternoon. look, i think you know better than anyone that mistakes were made and you sought to remedy them. you acknowledged that and you have owned up to that. i commend you for that. you have also said that these mistakes require fundamental and structural changes at your bank. i know you have been committed to this as your ten yu as ture ceo. can you highlight for the committee the most -- and this is a question of priority. the most important changes in your view that have been made at wells under your leadership? maybe it is something you haven't been able to highlight yet, but what changes have you made and how will those changes prevent these problems from recurring? >> i think the fundamental change of centralizing our
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enterprise risk and control functions is probably the most important change that we've made from an enterprise standpoint. because what it does, regardless of leadership, is create an appropriate check and balance in terms of insuring that we're providing the right products and services to our customers and managing our risks in an appropriate way. check and balance between those front line team members across the company that are making those decisions each day, and then having the oversight to make sure they're following all of our policies and procedures. and then as part of that, the way that information and data is being shared today is completely different. we connect data in a different way to spot problems across the entire company, and that's fundamental to the changes that we've made since i became ceo. >> you addressed some of those problems spotting advances that
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you've made with mr. davidson's questions, but i want to go back to some of the small business. you know, as most folks know you are one of the largest lenders for small business in the u.s. >> that's correct. >> the protection and growth of small business is one of our top priorities as republicans and on this committee and also for ranking. can you tell the committee what infrastructure and controls are in place to protect the small business clients? >> sure. the small business group and business banking group were moved out of our retail banking business and moved into our wholesale business. so there's a different team of folks that lead those businesses today. in addition, the oversight for those groups -- or the check and balance in terms of the enterprise control functions is outside of the business line. so the changes that i talked about that are enterprise wide also apply to small business lending, both in terms of our
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obligations under following the sba rules and regulations as well as non-sba type of small business lending. >> so what additionally would you say with regards to small businesses? you addressed a little bit, but to make sure that they're being treated fairly, i mean these people are coming out and operating no longer as an individual but as an entity in a small business. how are you making sure that they're treated fairly? >> well, we are making sure that we have the same checks and balances in place for those customers that we do for customers outside small business. >> very good. i know it is a tough day and probably even tougher knowing that you are talking to an ab state grab and that you went to michigan. i appreciate your time today and i yield back. >> thank you. the gentle lady from california, ms. porter, is recognized for five minutes. >> thank you for your patience during this hear, mr. sloan.
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in november 2016 you said, quote, i'm fully committed to taking the necessary steps to restore our customer's trust. you also said on a call in january 2017, quote, we've already made progress in restoring customers trust and we have remained committed to being transparent with investors. your 2017 proxy statement to investors you said, quote, restoring your trust and the trust of all key stakeholders is our top priority. those statements to me are pretty vague. they sound like they might be obscure, empty promises. do those statements really mean something to you, mr. sloan? >> they do. >> what -- why should we have confidence in those promises and those statements you have made? >> well, when you look at the changes that i have made since i became ceo, you see that team members are much more excited about working at wells farg
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oechlt th -- fargo. team member voluntary turnover is down to the lowest level in six years. the feet back we get from our team in terms of the changes we have made is positive. we have still -- we have more work to do. i don't mean to suggest we are done. i don't think we ever should be done. likewise, our customers feel the same way. >> so it is safe to say the statements you have made mean something to you and that investors can rely on those statements? >> that's correct. >> then why, mr. sloan, if you don't mind my asking are your lawyers in federal court arguing those exact statements that i read are, quote, paraidgmatic examples of nonactional corporate puffery on which no reasonable investor could rely? >> i don't know why our lawyers are arguing that. you asked me a direct question in terms of do i believe in the statements i made and the answer is absolutely correct. >> you are a personally named
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defendant in purple mountain trust versus wells fargo and timothy j. sloan. are you lying to a federal judge or to me and this congress right now about whether we can rely on those statements? >> neither. >> it is vent for yoconvenient lawyers to deflect blame in court and say your rebranding campaign can be ignored as marketing, but when you come to congress you want us to take you at your word. i think that's the disconnect. it is why the american public is having trouble trusting wells fargo. mr. sloan, i always want to ask you about, when we met you said that wells fargo is taking, quote, an expansive view of remediating its customers that have been harm. why then are you fighting tooth and nail in federal court to avoid returning $350 to each auto loan customer in southern california?
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the money i'm talking about to be clear are loans the customers paid off early and they're entitled to a partial refund of their gap insurance? >> because it is not our responsibility to ensure customers receive the refunds from the dealers that receive the money. it never went through wells fargo. >> your sales people sold them that gap insurance. it was part of the transaction when those customers took out the automobile loans. >> that's incorrect. the transaction occurred between the auto dealer and the customer. wells fargo was not involved. we never sold gap insurance. >> you've never sold gap insurance. do you profit from the sale of gap insurance? >> no. >> okay. because the situation that i'm understanding for these customers is that they're being told if they want a refund of their own money to which they are entitled because they paid off their loans early, they have to write a formal letter and mail it to american heritage insurance services.
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why is this money just not being automatically refunded? >> because in that circumstance -- and i will take that circumstance as being correct -- wells fargo did not receive that money. that is a transaction between the customer, the auto buyer, the dealer and the gap insurance company. >> the gap insurer would be the one who should be doing these refunds? >> that's correct. >> okay. my last question relates to what ms. talib, my colleague, was asking you about. as you know i was very involved with the national mortgage settlement and was the california monitor for the settlement. in your -- i'm sorry. i pulled a page out of your brochure today that you gave us. you said, also -- you said, attempts to contact the remaining affected customers are ongoing. this is 870 people that you failed to give a modification to and the 545 that you have already foreclosed on. i think this means there are more problems there, is that correct? >> we don't believe so. what we have done in that
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circumstance is we have asked our audit team to review the internal review that the business and the independent risk function did, and we don't believe that's the case. >> okay. >> the gentleman from tennessee is recognized for five minutes. >> thank you, madam chairwoman. i appreciate chairman waters scheduling this very important hearing today. mr. sloan, i appreciate you appearing today. you have answered a lot of questions, frankly a lot of tough questions about the problems that have have existedo that have led to several cases, a number of cases being brought against the company by federal regulators as well as by affected customers. for the record, i want to state that i clearly believe it's critical to our entire financial system that wells fargo continue to do everything that it possibly can to identify the customers affected, to compensate them accordingly, and
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most importantly, to make sure that this never happens again. i also think it's very important that wells fargo continue to cooperate with federal regulators and with federal authorities and i think it's your testimony today that you're doing that. given the number of scandals by wells fargo that there are customers who have been affected that you can't identify, what are you doing, what is wells fargo doing in order to try to identify these people who when their accounts were opened by your employees, may have been opened with incorrect or frankly fraudulent information. >> when we contacted over 40 million customers through 264 million didn't interactions, we
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sent them all their accounts and said, let us know if any one of those accounts was opened inappropriately. if that's the case, then we'll make it right by you. and we've had multiple interactions with those customers. and so we've done our best to try to ensure that any customer that feels that an account was opened inappropriately, that we make it right by them. >> some of these customers may find out on their credit reports obviously that accounts will be opened without their authorization. their credit history therefore would have been impacted. two simple questions that frankly require simple answers, is wells fargo working with these customers to help repair their credit scores? >> absolutely. what we found -- generally when we opened up a deposit account, we didn't run a credit check. the instances that we're most
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concerned about were in the instances when a credit card was opened up inappropriately. in those circumstances, in 40% of the time when we did a credit pull, there was no impact on the credit score. in roughly half, the credit score actually went up. what we're concerned about are the situations in which the credit score went down, where it went down, it generally went down between four and nine points, that's a range. that can have a bigger impact on some because it generally impacted customers with higher credit scores more than customers with lower credit scores. but we're asking any of those customers to come in and see us so if there was any impact, that we would make it right by them. in addition, those customers can take part in the class action settlement. >> let me ask it another way. as you know, dealing with credit bureaus, it's not easy for the
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consumer. is wells fargo working with the credit bureaus to try to help those customers? >> yes. in any situation in which we found that by our error that we provided inaccurate information to the credit bureaus, we're correcting the information. and we're asking our customers to contact us if they believe that that's not correct. to ensure that if there's any impact. >> on your website on the frequently asked questions portion of your website, you acknowledge about the consent order being in affect. that you were aiming to meet the requirements of the consent order by 2019. we're now in march of -- 2018, rather. we're in march of 2019. have you had conversations with the fed or any other federal regulator about lifting the consent order or consent orders. >> we have very constructive relationship with all of our
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regulators. and by the way, i don't think i've said enough today that the feedback that we've received has been very helpful in terms of us making progress and improving risk, customer complaints, across the board, the fed, the occ, so on, but in terms of our -- >> time has expired. >> i yield back my time. >> the gentle lady from iowa is recognized for five minutes. >> thank you for being here. i appreciate it. i value the employers in my district and as i know you're aware, wells fargo employs almost 15,000 iowans in my district. but when the "new york times" quotes one of those des moines employees who graciously is here today saying that there's an overwhelming sense of frustration, i'll take notice. that article describes that in des moines, workers are expected to handle 33 calls an hour and
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recoup $40,000 per month. so let me clarify that. that's 1.8 minutes per call. can you confirm that you use these targets to evaluate your debt collection employees? >> i'm not familiar with those specific targets. >> i'm told you use a 4-point scale and completing a call every 1.8 minutes only gets you a three. it doesn't even get you to the top of that scale. can you confirm wells fargo has -- >> i'm not aware of that. >> i spoke -- >> i'm not saying that we didn't. i'm just saying that i'm not aware of terminating any team members related to that incentive plan. >> thank you. i spoke to an employee who said people have been fired for not reaching these goals. and i want to add that hitting these goals is based on random luck of who picks up the phone than anything they can control. i actually spoke to one of your account specialists and he described a system if he fell
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below his target in any key performance indicator, then he would receive an warning. if that persisted, then he would get a formal warning and be reviewed for termination. this sounds like, instead of those cash bonuses that were used for hitting targets previously that cause add you will o f these issues, are now being switched out for an incentive to keep people's jobs and i'd argue that that's worse. my career has been focused on organizational development. when i hear that people are afraid to use your ethics line because of fear of retaliation, i fail to see how you've changed your culture. >> congresswoman, retaliation has no place in wells fargo today. we've reorganized our ethics line since i've become ceo.
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i've brought in an independent third party to look at our ethics line. all of the calls that go to our ethics line first go to an outside third party. we have -- >> thank you. i appreciate that. certainly we know that people have said they don't feel comfortable in doing that because they have actually seen the retaliation. but moving on. in september 2018, wells fargo announced it planned to reduce its workforce by laying off as many as 26,000 workers. in november of 2018, wells announced laying off 400 employees. >> we never announced that we were going to layoff up to 26,000 employees. what i said at a town hall where i -- >> did you layoff 400 pleas in des moines. >> i was referring to the first part of your question. that's not an accurate statement. generally what i said was that between -- that over the next
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three years, we expect our total employment to reduce by between five and 10% -- >> i'm concerned about the people in my district. were 400 people in des moines? >> 400 folks were displaced in des moines -- >> what was the reason for that layoff in des moines? >> it depended upon their job. some of those folks were displaced because of the fact that the amount of servicing demand that e with had in the mortgage servicing business had declined. there were other reasons -- >> i have a signed affidavit here saying that an employee in des moines was told her job was being moved to india and employees in that area have gone to india to train those replacements. and i've heard from employees who were using your virtual classrooms to train other people in other companies. are these recent layoffs you
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moving jobs overseas. >> no. >> you've added more than 10,000 employees between india and the philippines and i know you're being a new facility in the philippines. can we expect that more of your planned layoffs are going to be jobs overseas. >> no. i don't believe that's going to be the case. we have 20,000 job opening at wells fargo today. 90% of those are here in the u.s., probably more than that. we hire between 40 and 50,000 -- >> i fail to understand, though, how we're laying people off in this country and being jobs overseas. thank you. >> thank you. the gentleman from wisconsin, mr. style, is recognized for five minutes. >> i want to start by thanking chair waters for calling today's hearing. i think it's important that we understand what went wrong at wells fargo and ensure that actions have been taken. we've heard a lot of discussion
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today about the bank scandal and i think members are committed to holding wells fargo accountable and preventing future abuses. i also recognize that we're having a valuable discussion today about the role that big banks play in our financial system. mr. sloan, according to your figures, a signature number of wisconsinites have been armed by wells fargo's practices. almost 9,000 customers have been impacted by unauthorized accounts, 9,500 were harmed with the auto insurance scandal and the bank's mortgage rate lock scheme affected over 900 people. my concern is that the reputational damage that's occurred is bleeding over into other banks that are by and large acting and abiding in legal and unethical manner. i'm nervous we're going to walk away with a view that having a
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strong, healthy financial services in our country is important. and so i open we can come away with this hearing that in order to have a healthy economy that provides opportunities for all americans. we need to have a financial services sector that includes big and small institutions and operates with customers in mind. we've heard today a little bit about the size of the operation. do you think the size of the bank caused the problems or was it an issue with the culture and incentives that were place at wells fargo? >> i think it was driven by our organization structure, some of our incentive plans and leadership. >> fair to say you don't think it was too big to manage. >> no. i don't. >> i'd like to jump over -- you mentioned that you now have a starting wage at $15 an hour. >> that's correct. >> is that because you viewed you needed to bring in people of high quality, high talent to
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come in and alter some of the problems that were existing before. >> i think our team before, we changed our minimum wage was high quality and was doing a good job in meeting their customer needs. what i was concerned about is that the turnover at many of those entry level roles was too high. what that could create would be an inconsistent experience with our customers. while it was high initially, i thought it was the right long-term decision in terms of reducing our turnover and that's exactly what we've seen. and that's created a better customer experience because our customer experience and score in those areas have actually gone up. so i think it was the right decision to make. >> so i'm supportive of driving up those wages caused by market forces, that's how you're
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recruiting individuals to come into the bank, not by socialism or peoplism, but by a free market approach and improving the customer experience at wells fargo. let me shift slightly and go over to the oversight role and your chief enterprise risk officer is now a direct report to you. >> that's correct. >> and that has been an effective way. has that continued between you and your chief compliance officer? >> absolutely. i interact with mandy every day and we talk about a variety of things. one of the changes we've made since mandy has joined the company is that we have a new enterprise risk and control oversight committee that she and i both chair. we hold that meeting on a monthly basis. those meetings are ways -- and we have the -- that kind of structure in each one of our
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business lines and enterprise control functions. that's where key risks in the company are determined and discussed. and those meetings have been very helpful. anything that comes out of those meetings and escalated to our board. >> thank you for your time. i yield back the balance of my time. >> thank you. the gentleman from illinois is recognized for five minutes. >> thank you, chairwoman. thank you, mr. sloan, for coming here today. i have some math questions and these are i think straight forward. but i'm scratching my head. if i'm following the math right, last year you had about 3 1/2 billion dollars in fines last year, if i add up the smaller ones -- >> that included settlement of the matter from about a decade ago, that's correct. >> okay. now you -- the tax cut last year saved you about the amount.
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it was -- from an after tax earnings perspective, it was act a wash for you. >> i would say it was a bit less than that -- >> squint your eyes, it was pretty close. >> that's correct. >> if i look at your share price, it's about where it was in 2017, so the market seems to have said, yeah, plus one, minus another, you're about even. the first question comes as given that a lot of your senior executives your compensation is tied to share price in some fashion, is that about a wash for you personally, if r the senior leadership team? >> i'm sorry. i'm not following you in -- >> you're down 3 1/2 billion dollars worth of fines. you're up $3.4 billion in terms of avoided tax revenue. so your earnings are about constant. your share price is about where it was in 2017.
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>> that's correct. but i would say there were a number of other variables that had an impact in terms of our results. >> okay. so here's where i start to get to my question. the -- if this was a one time event, you would say that markets shouldn't factor it in. 2018 was an anomaly, you had 1.4 billion in penalties and 3.4 billion in 13. if i assume the market is discounting that back. that's like 17 to 25% of your market cap that's taken a hit on these fines and i'm scratching my head at how your investors possibly tolerate that. i was the ceo of an energy company, and one of my -- as you come in as a new ceo, first one says, blame the last ceo, works great, it's a second problem, blame the last ceo, works great,
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it's a third problem, and it says prepare three envelopes. >> i only got one when i became -- that was to fix the problems that existed at the company and i think the changes that i've made since i've become ceo, some of which have been easy, some of which have been hard, are the changes that are needed to make to satisfy our shareholders. the shareholders are longer term shareholders and they see the future of wells fargo. >> here's the problem. in 2016 you guys laid off 5,300 employees and it was structured for a lot of the reasons that you described today. a year later, you got a record breaking fine. you've talked a lot about the compensation changes among teller and is among junior staff. if those changes in the past haven't made a difference, what are the incentives at the senior level and particularly what if anything has been done to -- you
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know, the basis of short term cash compensation and clearly if your equity price is basically flat after all of these fines, how much do you really care if you're getting a bunch of equity compensation. it would seem to me that the markets are kind of writing this one off. >> we hear about it a lot. because the most of the compensation for senior leaders at wells fargo including me is in the form of long term equity performance. the vesting of those shares is based upon our relative performance on a return on equity measure, a total shareholder return measure which would address the issue that you've just described as well as the achievement of certain risk requirements that have been set by us. so there's a multiple of reasons in which that equity would vest and the dollar amount -- >> but you've since got a one way hedge. if i'm sharing our share --
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>> no. because we go down to zero. i'm sorry. i don't mean to interrupt. the way that the return on equity measure would work, is if we don't achieve certain hurdles relative to our peers, then the equity vesting actually can be less than than -- >> but you're getting equity. if i'm an owner of wells fargo stock, i would be much more scrupulous than it appears your owners have been. i yelled back my time. >> thank you. the gentleman from texas is recognized for five minutes. >> thank you, madam chair. would you explain to me the protection insurance issue, what happened, what that is, where we went wrong? >> yes. in -- we had a business and have a business that makes auto loans
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and when we make an auto loan, we buy it from a dealer. when a customer takes out an auto loan, they're responsible for having some level of insurance in place to protect typical underlying collateral of the vehicle. there's nothing wrong with that. that's very standard anytime somebody buys a car and takes out an auto loan. where we made a mistake was our operational oversight of what would happen if for whatever reason the insurance would lapse, right, and the customer didn't have insurance, we had contracted with a vendor to provide that insurance to the -- our customer, the borrower, and we didn't have the appropriate oversight in those situations to ensure that the information that the vendor was using was correct. and so in some circumstances our vendor provided insurance to
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customers that already had insurance. we should have done a better job when that issue was escalated to me when i was in my prior role as chief operating officer of the company, i instructed our team because we couldn't assure ourselves that we had proper oversight, that we should end that process and we did it as of september 30th, 2016. >> very helpful and thank you. to that end, there was a settlement so many of the states, to the tune i believe of about 385 million. does that number sound correct? to pay these loan recipients back that didn't need that insurance? >> no. that's our estimate mason of what our remediation to customers is going to be for the collateral protection insurance. there was a separate settlement with 50 states as well as the district of columbia related to
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cpi and other consumer matters. that was $575 million and that went directly to the states. >> has all that been paid out so far. >> i believe all of its been paid out to the states. we're in the midst of remediati remediating customers. we're about a third to 40% through right now. we believe it will have all the customers remediated by the beginning of next year. >> okay. do you know what the delay is for the delay in repayment? about 10%, i understand, of the customers are in texas that are awaiting payment and i'm just like some kind of estimation on when we can expect that. >> i think that's an example of where the relationship with our regulators have been very helpful in particular with the occ where we've had a lot of give and take in terms of how extensive the remediation should be. we've taken a lot of good feedback from them.
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we've got the remediation plan in place. it has taken longer and i aapologize for that. but we want to make sure it's done right. but that the pace of that remediation has increased and, again, we'll have everyone remediated by the beginning of next year. >> thank you. i yield back. >> the gentlewoman from massachusetts is recognized for five minutes. >> thank yoi wanted to follow u questions that my colleagues had touched on earlier related to the corporate culture at wells fargo. you referenced wells fargo's commitment to address some of the country's most pressing, social, and economic issues. picking up on some of what my colleague was getting at, i'm encouraged by this pledge but skeptical. last year bloomberg news
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reported on the relationship between wells fargo and the nra. wells fargo issued approximately 431 million in loans to some of the largest firearms and ammunition companies. additionally, wells provided $40 million worth of lines of credit to companies. ruger is one of the largest firearm manufacturers in the country and their products have been used in the last nine mass shootings. this company has always donated significantly to the nra. i bring this up because gun violence is rampant. there have been 2,200 gun violence instants in the last five years alone. given your pledge and your commitment to help the country address some of these issues, yes or no, because i only have five minutes, do you think that stemming the economic of gun violence is a pressing social
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and economic issue? >> i do. >> okay. so could you tell me why when bank of america has stopped lending to ruger and other companies that make assault style rifles, jp morgan as well, what is wells fargo waiting on? >> we're not waiting on anything. we want to continue to bank industries across this country that follow the laws and regulations on a local, state and national basis. and we will continue to do that. in addition what we're doing is we're going to be partnering with a number of non-profits to donate $10 million for nonpartisan research in terms of how we -- >> reclaiming my time. i only have five minutes here. your website states that you're committed to the highest standards of integrities and you do the right thing in the right way and hold yourselves accountable. and yet you are providing
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millions of dollars to an industry that's determined to manufacture firearms of every increasing lethality, firearms that have been used to murder tens of thousands of americans each year. so my question was a rhetorical question, because i already know why you have not divested from the nra. according to filings, the nra paid nearly $10 million in banking fees between 2015 and 2016 alone to wells fargo. they held about 13.2 million in cash in wells fargo accounts. according to recent fielgs, they paid wells far $70,000. does this sound right? >> that's -- >> it's not right, but does it sound like what you're doing? >> it's not what we're doing. the only banking relationship that we currently have with the nra is that we have a loan which
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is am mothertizing on their building. they've moved their banking relationship outside of wells fargo. >> one of our first hearings was focused on the way in which one's credit score can break or make a consumer's ability to get ahead in life. many are still suffering consequences from this systemic fraud that took place at your bank through hits on their credit scores. on october 2017, you testified that of the 3.5 million unauthorized accounts, about 190,000 encured, million in fees and charges and wells fargo was working on refunding every nickel. but in your testimony today you did not provide much detail on your progress in making these harmed consumers whole. >> in addition to the out reach i described in my testimony, what we've -- what we've been able to do is continue to remediate customers.
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that's total as it relates to retail banking sales practices, about $31 million. we're not seeing any additional customers that are coming in to indicate that we haven't made things right. they can still obviously do that. we're also working with the class action to make sure that they have all the data that we have. we have all the data that -- >> are you removing harmful -- erroneous data from people's credit files. >> we've do that. to the extent that anything's been reported that's incorrect, we've remediated that. >> the gentleman from indiana is recognized for five minutes. >> good afternoon. >> good afternoon. >> i wanted to transition some of the conversation away from the dialogue about wells fargo specifically. but i wanted to talk a little bit more about the architecture of the financial system.
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you have a great deal of experience in the field and i'm curious as an observer of what's happened over the last ten years. it seems to an outsider that we got an arms race going on, an arms race between regulators and banks. banks are getting larger on account of some of the regulatory efforts that have been undertaken during the crisis. some statistics precrisis, there's about 36% of deposits that were in institutions that were greater than 250 million. now it's 49%. on the same side, regulators have grown dramatically. the fdic is quadruple what it is. what we haven't seen are a lot of new bank entrants.
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prior to the crisis over the last 20 years, there were 137 new banks that were started every single year. since the crisis, there have been 1.5 banks on average. what my friends across the aisle continue to talk about is consumer empowerment, and what they mean is regulator empowerment in hopes that will help the consumer. but back home, people who can't get a loan, that they don't have control of their financial future, they're saying, where's the empowerment, where's the real help. i wonder if you might be able to talk about how the regulatory environment has regulated new entrants into the industry. >> i don't think the regulatory environment is fundamentally impacted our ability to serve any of our customers. with a few exceptions.
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i think that in fact there's a place for every size of bank in this country, small, medium, and large. and i think what you're seeing today is that larger banks have the ability to use the economy's of scale and technology to invest in different products and services that customers really like. likewise i think you're seeing new entrants, nonbanks, come up with new products and services that are very interesting. sometimes they're offering those products and services directly to consumers. and sometimes they partner with firms like wells fargo or others. >> so break apart your first point, one of the things we've seen is regulators have ramped up the number of regulations that are being promulgated and the cost of doing business has gone up. banks have to respond to that. and they've gotten larger because they've got to am mothertize those over more and more people, loans, accounts, et
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cetera, and we've seen the number of community banks in the company fall over the last ten years. is that something that you would agree with generally. >> but i would also support -- there's been legislation that's been passed recently, that there could be different standards. i think as a large bank in this country, we should be held to a higher standard and clearly we are. in terms of medium sized banks and smaller banks, it should be graded down. >> ensuring that we have a runway, right, we want to watch larger institutions more carefully. we need to empower small institutions as well. i firmly believe that big does not necessarily equal bad. and that there's a place for every constitution in the ecosystem but i'm worried that the regulatory policies that are being pushed, enacted and called
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for might ensure that only big institutions can survive. and from my rural district, those institutions are servicing our area. how can we further the reach of the banking system to empower americans? >> we're not pushing products anymore. that was a -- >> poorly worded. my fault. >> i understand. but one would be a new account that we're piloting right now in seven states called greenhouse which is a new checking relationship that's focused on the underbanked and students, and the focus there is to provide a product that can be completely mobile so you don't need a local branch to go into that doesn't allow overdrafts, that has a debit card, that also has a budgeting system set up, help with financial education. >> i appreciate that work. hoozers back home will probably
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that. ms. o kalexandria ocasio-cortez >> you said wells fargo does not put profits over people. >> that's correct. >> i'm interested in the human rights abuses and environmental disasters that some say are financed by your bank, wells fargo. in a recent guardian article it was stated that wells fargo has pursued profits without principles by investing in private prisons for profit immigration, detention centers, payday lending and hoping much of the bond debt straining puerto rico. is it true that wells fargo has invested or financed in some of these industries. >> we made a decision two years ago to and it the two relationships that we had with two public prisons -- private
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prison firms. what has been and then when the credit agreement matures, we will no longer have that relationship. >> are those two companies gee owe group and correspond is a vick. >> correct >> which one has been and itted? >> i can't recall which one. >> i'd like to seek unanimous consent to submit three reports. >> without objection. such as the order. >> why was the bank involved in the caging of children and financing the caging of children to begin with? >> i don't know how to answer that question because we weren't. >> so -- you were financing and involved in debt financing of those groups? >> for a period of time, we were involved in financing one of the
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firms. we're not anymore and the other. i'm not familiar with the specific assertion that you're making. but we weren't directly involved in that. >> so these companies run private detention facilities run by i.c.e. which is involved in caging children. but i'll move on. mr. sloan, wells fargo was also an investor and a major investor in the dakota access pipeline. they were prime investors to companies building these pipelines in defiance of the treaty rights to protect its waters and lands. they wrnd early on that was pipeline was unstable and bound to leak. despite that, it was built any way. since wells fargo financed the building of this pipeline in
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an -- in an -- in an environment tally unstable way, why shouldn't the bank be held responsibility for financing the clean up of these disasters? >> which pipeline are you referring to. >> either. >> we were not involved in the financing of the xl pipeline. we were one of the 17 or 19 banks that was involved in the financing of the dakota access pipeline. >> so, wells fargo hasn't financed any company associated with the keystone xl pipeline. >> no. i didn't say that. i said we're not involved in financing that pipeline specifically. >> okay. let's talk about the dakota access pipeline. should wells fargo be held responsible for the damaging incurred by climate change? >> i don't know how you'd calculate that -- >> from spills or when we have to reinvest in infrastructure building sea walls from the
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erosion of -- from the erosion of infrastructure or cleanups, wildfires, et cetera.? >> related to that pipeline? i'm not aware that there's been any of what you've described that ds occurred -- >> how about the cleanups from the leaks? >> i'm not aware of the leaks associated with the dakota access pipeline. >> if there was a leak from the dakota access, why shouldn't wells fargo pay for the cleanup of it since it paid for the construction of the pipeline itself? >> because we don't operate the pipeline. we provide financing to the company that's operating the pipeline. our responsibility is to ensure that at the time we make that loan, that that customer -- and we have a couple of people in wells fargo including an environmental oversight group headed by one of my colleagues who used to be -- >> why did wells fargo finance this pipeline when it was widely seen to be environment tally
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unstable? >> again, the reason we were one of the 17 or 19 banks that financed that is because our team reviewed the environmental impact and we concluded that it was a risk that we were willing to take. >> thank you. the gentleman from ohio is recognized for five minutes. >> thank you, madam chairwoman. thank you, mr. sloan for being here. from the questions and answers we've heard, it seems clear there's still a significant amount of concern regarding the steps wells fargo has taken. i think it's important for us to remember that these actions hit real families, they hit them in ohio, my home state, misconduct resulted in more than 1,500 ohioans having unauthorized accounts, being charged for protection insurance and nearly
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1,500 impacted by being improperly charged an extension fee. our constituents have to ask themselves what should they do as a result. for my first question, i kind of want to go back to what mr. mchenry was talking about earlier. and he mentioned that there have been reports of ongoing investigations into excessive fees in the wealth management division, money-laundering programs and underwriting is software issue and violations related to the sale of add on products and the freezing and closing of accounts. i know that's a lot that we just talked about. but just from your perspective, can you give the committee a sense of which issues you're tracking right now and give us a sense of whether we're out of the woods. because it does feel like there's a lot still up in the air here. >> there is. and i'm tracking all those issues not just one of them.
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all those issues occurred prior to my stepping into this role as ceo, but now that i'm ceo, i take responsibility for resolving them. i think the changes that we've implemented -- or i've implemented since i've become ceo are addressing those issues and one of the promises they made to all of our stakeholders when i stepped into this role is that we would look far and wide within the company to make sure there were no other issues. that's why some new issues have occurred, they're not necessarily new error that is we made. it's that we've encouraged the team to look very hard so we can get through this very challenging part of our history and make sure that any customers that were impacted that we treat them appropriately. >> got it. just so i'm kind of understanding this correctly, what you're saying is we did have a lot of issues, that's obvious -- >> there's no question about that. >> nobody is denying that. but since you took over as ceo,
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you feel like you've put a stop to that, you're still investigating the things that went on prior to your arrival and that going forward since your time as ceo, you feel very comfortable with how the bank has performed on these issues? >> i can't promise you perfection. >> right. >> but what i can promise you is i believe that the organization we put in place, the investment in thousands of more risk professionals as well as technology, as well as investment and risk, is putting -- putting us in a place that the chances of those -- of these types of issues occurring again, right, is much, much less. >> okay. great. and then my next question shifts to the culture. i know the "new york times" just wrote an article suggesting maybe the changes haven't been as effective. can you talk about specifically what you're doing at the executive level, as your level, to make sure that the culture does in fact turn over.
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it's a big organization. it's hard to turn around a culture in just a few short years. >> so one of the key changes that we've made is encouraging team members that if they see something that they're concerned about, or they have a good idea, that they should raise their hand and let us know. >> has that resulted in proactive -- >> absolutely. and the way that we track that kind of information is much differently. we've also encouraged our team to the extent that they're uncomfortable raising something to their manager or the human resources group, to be able to call our ethics line. and that call to the ethics line go outside the company and their dispositioned in a much more independent way to ensure that there's no retaliation in the company. >> great. and then for my final question, some of my colleagues on the other side of the isle are -- what i would call attacking wells fargo for conducting business that is perfectly legal
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with customers. so the groups that were just mentioned, were any one of them breaking federal law when you were banking them. >> not that i'm aware of. and one of the standards that we set in banking any sort of industry is to make sure that there's a double-check beyond just the normal credit underwriting that we would do for -- on a reputational basis so that we don't run into those kinds of issues. >> thank you. and i yield back. >> the gentleman from utah is recognized for five minutes. >> thank you. mr. sloan, i think without question, wells fargo has caused harm to hundreds of thousands and possibly millions of customer. your violations have stretched from sales practices where the company opened millions of accounts in customer's names without their consent or knowledge to violations of the civil service members debt. and just in november, it was
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reported that you foreclosed on 545 customers based on a computer error. 545 families kicked out of their homes. 545 families with their stability uprooted. all the consent orders and fines in the world can't repair that damage. in your written testimony, you discuss the transformation of the company and i believe you want to improve the company and we want you to improve the company because we want these practices to cease. wells has over 3,000 employees in my state and i think these employees, i want them to be proud of where they work, and not have a workplace that pushes them to act unethically or illegally. so i wanted to go back to your comments about the "new york times" report and i'm paraphrasing but i think in a previous question, you said that you disagreed with the content of that story. if these employees feel this way, then i think that's a concern for us. you can disagree with the
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report, but those employees matter and their concerns matter. and the article says, quote, in a survey of more than 27,000 employees in the bank's information technology department late last year, top concerns included their ability to raise grievances with managers and whether wells fargo conducts its business activities with honestly and integrity. it goes onto report that workers at wells fargo recently flooded the bank's internal logs with hundreds of angry comments about the sale incentives. so if employees feel like they can't raise grievances with managers, whether or not you believe that to be the case, then that's a concern and it raises questions about the concern -- about the culture of wells fargo. what do you think are at the root of -- root causes of these concerns and do you believe these employees when they say they feel this is a problem? >> i don't mean to question how any of our team members feel.
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and there's no question that improving culture is a journey. and i don't mean to sit here and suggest that we've solved the issue because it's -- it requires leadership and managers and communications, an open relationship with our team members. one way i deal with it and i'll give you my example, is that i hold town halls every other month. i provide an update for about a half an hour for your team members. there's generally 500 to 2,000 team members in attendance. they're broadcast to the entire company live and then we take unscripted questions from team members and whatever they would want. at the end of every one of those town calls, i say the following, if there's any concern that you feel about this company, that you feel hasn't been raised, call me or send me an e-mail. i get communications from our
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team all the time and i make sure that we follow up. i can't promise you that every one of our 260,000 team members jumps out of bed and runs into work and is the happiest place on earth. but when we survey our team members, that's not the results that we get. that doesn't mean that everybody feels the way i would like them and that's why this changing culture is a journey and we're not done yet. >> and i just want to make the point, i think it's not about morale or how people feel about the workplace, but it's do people feel comfortable that they can report concerns or grievances without retribution. many employees still feel this way. they feel the culture is not one where they can raise red flags -- >> i think it's disappointing based on the progress we've made that any of our team members
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feel that way. to the extent that that's how our team members feel, we will redouble our efforts to make sure that we've communicated all the changes we've made and there's no place for retaliation in wells fargo. >> it's alarming to me that employees are still feeling this way. and because if employees don't believe you when you say that the cultural has changed, then i don't know that we can conclude that the culture has changed. >> again, congressman, we have 260,000 team members and most of them when we survey, an overwhelming percentage of them feel the changes we made are making a difference. that's not to say we're not done yet. i'm not going to be satisfied -- i don't know if we'll ever reach that. but that's my goal. >> thank you. i yield back. >> the gentleman from georgia is recognized for five minutes. >> thank you, madam chairwoman. >> it's been a long day. some of the actions by wells
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fargo has been very egregious and is probably worthwhile you being here. i got a couple of questions before i -- the core question i want to ask you is going to deal with the occ's consent order and beneficial owner just so you know where i'm going to go with this. but i want to address a couple of things that i think is maybe overlooked or is unfortune in the direction some of my colleagues have taken today's hearing. what was your customer based prior to the scandal from the consumer standpoint, how many customers did you have? >> approximately 70 million. >> how many do you have. >> a little bit more than that. >> you experienced some loss, i would imagine during the time -- >> actually, no. what we experienced is -- we're always gaining and losing customers, people move and so on and so forth. we compete with business with other banks and we win and lose
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it every day. but overall since the fourth quarter of 2016, what we've seen is our customer base grow. it's not growing as much as i would like, but it's going in the right direction now. >> so i would take it then that your customers are pretty satisfied with this service you're giving some of the corrective actions you're making. >> that's the feedback that we get from them. in addition to -- on a specific base in a retail business where where he survey customer experience, we also have a survey that we do monthly and we're going in the right direction. we have more work to do, but your statement is correct. >> one other issue i want to address. do you make auto loans? >> we do. >> are you going to continue to make auto loans. >> we are. >> the reason i'm asking you this is because according to the cdc, more people were killed by auto accidents than there were by guns in the past several
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years. using the logic of some of my colleagues, i'm not going to sit here and ask you to quit making auto loans. i'm one of the few on this committee that's been a victim of both gun violence and of what should have been fatal auto accident. you may have made the loan to the rental car company to buy that car that i was a victim of a triple flip over accident on an interstate. on two indications i've been shot at, once on a baseball field and once back at home. i don't want you to -- i'm not expecting to use your business as a tool to shape culture, do a cultural expermit or make a lab to do something that wouldn't be done otherwise. and i think that's unfair to put you in those position. both of those are legal in the united states and those businesses that operate sell guns, whether they sell
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automobiles or manufacture automobiles, that is something that shouldn't be laid at your table. i just wanted to address that. now onto the core question. it's given you a consent order regarding beneficial ownership and during your second quarter 2018 filings, you stated that some federal agencies have been making inquires into the bank regarding inappropriate conduct ra related to the collection of information. what's the inappropriate conduct that took place? >> the consent order that we have in place with the occ covers our program and our wholesale banks business, i'll be quick, and what the focus there is not that we're not following bsa, aml laws, but we're not doing a good enough
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job of documents how we make decisions. they're correct and we're improving our capabilities. one of the requirements that was introduced about a year ago is a beneficial ownership form. and what we found because of a call to the ethics line that we put into place after our -- after i became ceo was that we had some of our team members that were -- that were not following our policies and procedures in completing those beneficial forms and that's unacceptable. >> you are complying at this time? >> we are. we have more work to do because the order hasn't been lifted and we take our responsibilities to the occ seriously. but we're making progress. >> i know there's auto lot of confusion with the customer due diligence rule regarding this, so i applaud your efforts. what has taken place is
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egregious. i do appreciate the efforts you're making to move forward. >> the gentlewoman from virginia is recognized for five minutes. >> thank for joining us here today. as i was going through the materials to prepare for today's hearing, i was just so struck by really the scope and the breadth and the depth of fraudulent activities throughout basically every one of wells fargo's subsidiary businesses. but i think it's important to tick off some of them. comhurm banking with the opening fraudulent accounts, debit cards on the auto loans, i know that you dispute the actual selling of the forced place insurance, but you did repossess a number of cars that you shouldn't have as a result of that.
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wells fargo wealth advisers, there was some churning of investment that is were supposed to be long-term investment and is selling those to receive commissions and fees. on the mortgage side, there were inappropriate fees charged for interest rate locks even when the delay was due to wells fargo's own actions and the violations of the service member's civil relief act are pretty egregious, including repossessing cars from service members who are deployed abroad. you're subject to 14 separate consent decrees, is that correct? >> correct. >> so you would agree with the chair's assessment that there was pervasive and persistent misconduct at wells fargo? >> i think we made a significant number of mistake that is we shouldn't have made. we've taken responsibility for those errors and since i've
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became -- have become ceo, we've made fundamental changes in the company to address those shortcomings. >> now you had said that one of the causes or what you perceived to be a potential cause of all of these offenses was that you had a decentralized management system at wells fargo, is that correct? >> that's correct. and now, each subsidiary was going rogue on their own? >> i didn't say they were going rogue on their own. i think the way they were organized was they had the enterprise risk and control functions within the business line that didn't create enough check and -- the check and balance that we have today. >> okay. and -- but i just find it so interesting that each one of these businesses was engaging in the same kind of pattern of fraudulent misconduct, even though they were each operating on their own little spheres. so now you say that management
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and everything is centralized and that's going to solve this problem or at least help make sure that it's not going to happen again, is that correct? >> i think that's one of the fundamental changes that we've made since i've become ceo to address it. but it's not the only one. >> okay. so just to my mind, i can't get -- wrap my head around why and how every single subsidiary of wells fargo was engaging in some sort of fraudulent activity if it wasn't coming from the top. are you -- would it be your position that all banks do this sort of thing and wells fargo is the one that got caught. >> of course not, but i wouldn't agree with the statement that every one of our operations was engaging in inappropriate activity -- >> just the ones that i listed, the auto mortgage consumer deposit accounts, all of those were, right? >> there's no question we made errors in those businesses.
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>> now, you've been employed at wells fargo for about 30 years thereabouts? >> 31 1/2. >> and most recently as chief operating officer before you became -- >> i was chief operating officer for about ten months. >> okay. to the consumers who were wronged by wells fargo during this long pattern of misconduct, how do we -- how do we assure them that you're the best person to change the culture when you've been part of the culture for the last three decades? >> because having knowledge of the company allows me to make the difficult decisions to reorganize the company more quickly. that's what i've done. this company has gone through fund fundamental change, more fundamental change than it's ever gone through in its history. >> well, is that because of your leadership or because of the oversight of the various federal agencies who have consent dec e
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decrees? >> i made all the decisions. i take responsibility for those decisions, and whether they work or they don't. >> thank you. i see my time is up. i yield back. >> thank you. they called the votes on the floor. we'll try to avoid having to return and keeping mr. sloan here. so mr. lynch, you're recognized for five minutes. i'm going to be very strict on the number of minutes so we can all get to vote. >> thank you, madam chair. i'll try to be quick. mr. sloan, i have to say i'm amazed. i've been here a while. i was here during the financial crisis. i'm amazed at the willful and disgraceful conduct of wells fargo. i really am. aig made mistakes. they mispriced some products, there were mistakes made there. in your case, you robbed your customers. you robbed your customers.
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so we deal a lot on this committee with the final crimes enforcement network. a lot of those cases are people hacking or cyber criminals stealing funds from strangers. in your case, you robbed your customers. the people who came to you and trusted you when you say we made a mistake, robbing your customer is not a mistake. there's something deeper going wrong there. you said we had errors in those businesses. robbing your customers is not an error in business in the deepest sense. there's something more sinister in that. when people come to you, they deposit money into your bank and you rob them. 3.5 million. 3.5 million fake accounts and fake credit cards. and i'm just stun ned -- i don'
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know if i'm madder at wells fargo or our regulators that they did not just step in, remove mr. stumpf and appoint a receiver for wells fargo and break you up. you are still like the 12th biggest bank in the world. $2 trillion in assets. i think your conduct over the past decade that proven that you're way too big to even manage what you have going on right now. you say you'll make a difference now because everything is centralized. the robbing of your customers was centralized. 3.5 million. this was not an outlier. you fired 5,300 employees. this was part of your -- they were fired for following company policy. make no mistake. 5,300 people don't go rogue
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together. these are employees following company policy. it's disgraceful. we have -- the fdic, one of your regulators, has grounds for removal and taking over the bank. and breaking it up. if there was -- one of the standards is if there was a willful violation and concealment of the institution's books, papers, records or assets. opening up fake accounts, taking the information that you got, social security numbers, all that stuff that your customers gave you, filling out fake credit cards, charging them for that, opening up fake accounts with peoples names on them that they gave to you as a fiduciary, that would seem to qualify. if there was a violation of law or regulation or any unsound practice or condition that weakens the bank's condition. that's you. that's you all over in terms of
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your bank. if the bank was found guilty of any federal criminal money laundering o ining offense. i got a violation of the bank secrecy act and one of your employees doing a deal with the sinaloa cartel allowing them to buy an aircraft, they funded it through wells fargo. you know, you basically qualify with all of the things that would lead the fdic and the regulators to remove the ceo and take over that bank. i don't know why they haven't. they'll be up before this committee eventually in a couple weeks. i'll ask them the same question. if i were you and you wanted to do the right thing, put this bank on the right path, break it up. decide how you would dismantle this so we don't lose all the jobs. but you are way too big. your conduct has been
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disgraceful. i think you would serve your customers and you would serve the financial system and our country much better if you agreed to just break up the bank a in functioning pieces that are accountable to their customers and the general public. i yield back. >> thank you very much. the gentlewoman from pennsylvania, is recognized for five minutes. they're holding the floor open for the vote. we'll see if we can make it. >> thank you. thank you, mr. sloan for being here. i wanted to say to you i was eager to read your testimony before coming to this hearing today. i will tell you i'll preface it by saying i'm a wells fargo customer, i have an account or two at wells fargo in addition to other places. i was eager to read your testimony. i also come from a background of teaching writing at a university for ten years. i always told my students to
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avoid you'euphemism. i was gravely disappointed at the testimony i read, here's why. your first paragraph you came and you said you were looking forward to the opportunity to discuss the transformation at wells fargo over the past two years under your leadership. you were determined to address the retail sales practice issues that occurred in our community bank. i pledge to look back years. we discovered issues that we need to address. every one which was a disappointment to me. i want to be accountable and transparent. these are your words. and we have. that's what you said. we've been accountable and transparent. we've gone above and beyond than what's required in disclosing these issues. i was struck by the lack of transparency. i was struck by language that did not at all reveal the grave fraudulent things going on at wells fargo. not just in the past two years but maybe as far back as 2002.
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what struck me was the first step in solving a problem is recognizing there is one. i have seen here in the last four hours an absence of a recognition of the real problem and the real harm you caused people. there's a draining of humanity in this whole conversation i can't believe. i was a state representative before i came here. i sat with people trying to go through the tangled web of mortgage modification. when we look at your mortgage modifications, what you revealed, that 870 customers were incorrectly denied loan modification because of a computer glitch. some computer for five or six years ran and denied people modifications. 545 of those customers lost their homes. what did you do? how did you calculate the exact harm to each and every single one of those 545? not to mention the 325 who were wrongly denied?
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>> so what we're doing -- >> i want an exact calculation. give me an example of one human being. >> for some of the customers that we have foreclosed inappropriately on, because they didn't receive a modification, we have sent them a $15,000 check. they've been satisfied with that remediation. >> i have to stop you there. i went on your website. i looked at different places where a website like me could go in. the things you have said today. you sent $15,000 because you didn't hear back from them, you consider them satisfied. imagine losing your home. you don't know what equity they might have lost in that. the stresses, the human toll. have you seen families sit and go through what they think is a shameful experience? i can't keep a home over my children's head. it's a shameful feeling. a horrible feeling. not to mention the uncertainty of it. you thought a $15,000 check
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satisfies it? shouldn't there be an exact calculation of harm per individual? yes or no? should you calculate per individual? >> that's what we're doing. >> no, you put the burden back on the borrower. >> to the extent that there was a foreclosure -- i want to take this specific situation you described. to the extent there was a foreclosure and there was any equity in the home, that was returned to the customer already. we've said to those customers, if $15,000, which is 2 1/2 times the amount -- >> i will stop you there. we heard you say the 15,000 fee 2 1/2 times. here's what's dissatisfying to me. as you, the commander, the captain of this ship, what i think you should have instructed your subordinates to do was to say don't offer them 15,000 and see if that will satisfy them. find out the exact harm that we caused. >> that's what we've done. >> like the recall of a bad drug. >> that's what we've done. >> no, you put it back on the
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customer. like the customers who might have had too much fee taken from them for holding on to an interest lock. you put it back on the customer. get back to us if you think you were wrongly charged. how are they to know they're wrongly charged. i will end with this because i know i'm out of time. >> i would love to answer your question. >> look at your overall language, your language reveals you don't get it, you're fogging over the problem. in this beautifully printed book called our culture chapter 3, listen to this. after extensive -- >> the gentleman from illinois is recognized for five minutes. >> thank you, madam president. or madam chair. >> i like that. >> is there an announcement to come? mr. sloan, with respect to the review of the scandals that
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wells fargo has been involved in over the past several years, including the fraudulent customer accounts that were probably the greatest of scandals, the illegal student loan servicing practices, the checking account overdraft fees, the mortgage lending abuses, the auto lending abuses that we've learned about, in this hearing and prior to the hearing is it fair to characterize these scandals as the largest scandal that has occurred among the big four banks in this country in modern history? >> i am not familiar with the impact on other banks. i can't answer your question. >> you're familiar with banking in this country and the scale that has occurred and the penalties that have been imposed. does that make it the largest scandal in terms of consumer abuse? >> based on penalties imposed --
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>> based on everything. the scale. the number of fraudulent accounts, the other enumeration of incidents that have been documented and litigated et cetera, do you feel it's the largest scandal in banking history? >> i'm not trying to be difficult. it may be. >> i'll take that as your answer. it may be. two, in the interest of time, so wells fargo has engaged the immigrant community, profited from the immigrant community as customers, as a market share, and last january you released a video message urging congress to adopt legislative solution for the young people known as the daca also a of immigrants who are seeking a pathway to citizen. you say what happens dreamers is important to wells fargo because it affects our customers and
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their families. it also affects our own team since some dreamers already work for wells fargo. that's fine. that's to be applauded. but wells fargo has a dubious record when it comes to its treatment of immigrants and latino customers because in april of 2017 per a "new york times" report, which said that wells fargo employees were "instructed to round up immigrants, corral them into a branch office and cajole them into opening bank accounts. wells fargo employees allege in sworn statements they were ordered to target undocumented workers at construction silenit factories, 7-elevens. you called these allegations nonsensical because you can't do business with undocumented immigrants by federal law. if these charges were false why were employees willing to sign sworn statements that wells fargo's aggressive practices targeted undocumented immigrants? >> congressman, i saw the same
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report that you did. we investigated that, we found no incidence of that. >> but there is a pending federal lawsuit pertaining to the daca class of immigrants pending in san francisco, correct? >> that's correct. but again, we've investigated that and we have not found any incident. >> but a federal judge has found that it has standing and it remains an active lawsuit, correct? >> that's my understanding. >> yes. okay. two, with respect to -- this is my final question, madam chair. your head of consumer banking is quoted in a "times" article describing how the firm's entire system of how we pay, coach and develop team members is designed to focus on customer experience and customer outcomes. you testified this morning that your wperformance evaluation system prioritizes customers.
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according to a report released this morning by the committee for better banks, the maximum quarterly bonus for employees under the customer experience metric dropped from 1,425in 2017 to $875 for 2019. if you're truly prioritizing customer experience, under your new performance evaluation, why have these bonuses under the metric declined? >> so i've asked our team. i saw that same report that came out yesterday. i asked our team to look at it yesterday. other than spelling wells fargo correctly, acknowledging that we pay -- >> the gentle lady is recognized for five minsz. your ti minutes. >> ms. vel veazquez.
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>> since 2016, wells fargo has been fined for opening credit card accounts, abuse of several members, and security fraud charges associated with the sale of complex financial products to retail investors. your bank also continues to be the subject of a number of ongoing investigations. mr. sloan, you cannot sit there with a straight face and claim to not be responsible for all these abuses that have been committed against consumers. my question to you is do you believe that consumer abuses as well as fraudulent and deceptive actions, practiced by large financial institutions could pose a threat to financial stability? >> i think that banks and banks
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like ours should follow the rules and regulations set forth in this country. i completely agree with that. we have a duty to provide products and services to our customers in an appropriate way. and if we don't provide that, there are both financial and reputational harm that's done to the institution and could have an impact on the economy. >> so can you tell me why the fed did not remove the asset cap? >> as part of the consent order with the f.a.d., they want us to improve -- >> the answer is because you focussed on growth and profit, not risk management. is that the transformation that is happening at your institution? >> we're significantly improving our compliance and operational risk management, which is the paragraph three of the consent
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order with the fad. >> the fad does not agree with you. that's why they didn't remove the cap. you know it. all americans deserve honesty, integrity and trust when it comes to placing their money in the banking system. a culture of deception an deceit erodes that trust and leaves depositors to lose faith in our financial institution. to me, i believe that that represents a threat to financial stability. i yield back. >> thank you. ms. adams is recognized for five minutes. >> thank you, madam chair for organizing today's hearing and thank you, mr. sloan, for coming
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today with your testimony. last time we spoke you said wells fargo was making a number of changes, including changing the competitive and toxic sales culture and developing an inclusive culture among other things. my colleagues covered a lot of ground today. let me ask a question or two about diversity. as you know, the financial industry continues to be plagued by lack of diversity and complaints about harassment and discrimination. i believe that if employers are serious about diversity, they'll link their end of year bonuses to their diversity goals. my question to you is does wells fargo currently link its diversity goals to corporate bonuses? >> yes. in the incentive compensation for our senior leadership team, one of the measures of the management portion of that calculation is based upon not only their commitment but also
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their progress in meeting our policies and procedures related to diversity and inclusion. >> so, do you believe that wells fargo under your leadership has done everything that it can do to make the company truly reflective of america's diversity? >> i think we've done a lot. but we've got more work to do. one example i would give you is that when i stepped into the role of the chief operating officer, i instituted the wells fargo equivalent of the rooney rule, which means whenever we have a senior leadership role open in the company we need to ensure we have a diverse slate of candidates for that role and a diverse panel of interviewers. that's made progress in terms of the number of women and the diverse leaders in the company. >> we want to make sure we have some african-americans in there as well. we talk about diversity, sometimes we forget that. you can also say minorities are women as well.
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i support that being -- >> michele lee, i don't mean to interrupt you, but michele lee who runs half of our retail banking business who lives in charlotte is african-american. >> let me move on to an issue that we're having in charlotte, as i'm sure you're aware of, that's affordable housing. according to your business standard report, wells fargo home lending is the largest home mortgage lender and servicer in the u.s. funding 1 out of every 9 loans, and servicing 1 out of 7 loans. first, do you believe that merge is in the midst of an affordable housing crisis? >> i absolutely do. >> and given the dominance in the housing sector, by wells fargo what are you doing to tackle and combat the housing affordability predicament that many communities are facing, particularly in the city of charlotte? >> we are doing a number of things. i'll give you two quick examples. one is our neighborhood lift program. we're providing down payments in
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the form of grants to low to moderate income folks. for example, i was just at our neighborhood lift program in los angeles. i was there when we provided the down payment for the ramirez family to afford their first home in palmdale, california what we've done is allowed -- or provided enough grants. so 20,000 low to moderate income home owners, mostly diverse, have been able to afford a home in the last six years. that program has distributed about 4$449 million. and we're continuing on that program. >> you spoke earlier about the $15 minimum wage or more. how did raising that wage to $15 -- how much did it cost wells fargo to do that? >> on an annual basis about 2$20 million.
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>> what was the median annual salary the bank paid in 2018? >> about $60,000. >> are you going to increase it more? 15 is good. but, you know, it's still very difficult. we have a lot of poverty in our community and communities all over this country. i'm curious about that. do you have plans for doing more? >> i want everybody tho make $1 an hour. >> will you do more? >> we look at compensation every year at wells fargo to make sure we're paying competitively. i think we've been a leader in the industry in terms of how we pay our entry level team maybes. that's how i started in banking, working my way through college as a teller. >> i yield back. would like to thank our witness for his testimony today. without objection all members will have five legislative days to submit additional questions to the chair which will be parted to the witness for response. i ask the witness to respond as promptly as you are able. without objection all members
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will have five legislative days within which to submit extraneous materials for the record. this hearing has revealed wells fargo has cleaned up its act, too big to manage and the steps regulateders have taken are woewoe inadequate. the "wall street journal" reported yesterday the office of the comptroller of the currency, wells fargo chief regulator is considering forcing out several executives and board directors. i think the occ should take this important step and the regulators should consider with you, mr. sloan. it is also time for congress to take bold action to protect our constituents. i intend to reintroduce the mega bank accountability and consequences act a bill i first introduced in 2017 to address
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>> sunday night on afterword, georgetown university professor -- examines russia ticket foreign policy and international goals. by democraticewed congresswoman dana titus who serves on the house foreign affairs committee. >> are you more optimistic that if we find some common ground that we can be a good partner with russia? popularity has fallen by 40 points since he was reelected last year. public opinion data in russia shows the majority of russians now don't want stability, they want change. they wanted better economic situation. many people understand that having this very antagonistic relationship does not work. it is not the way to go if they want to have greater economic growth. >> watch afterword sunday night
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on c-span2. watch american history tv, live on saturday, starting at 9:00 eastern from historic tour -- ford's theater in washington, d.c. for the 22nd abraham lincoln symposium. it brings together lincoln scholars to highlight the 16th president's life, career and legacy. ,peakers include james tackett blight, and david michael burling gate. watch american history tv this weekend on c-span3. >> here is some of our live coverage wednesday on c-span. the house comes in for general
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speeches at 10:00 a.m. the continued debate on a nonbinding resolution calling for robert mueller's report to be made available to the public and congress. c-span2, the senate continues work on the president's judicial and executive nominations including neomi rao. eight: 50 p.m., we cover the 75th annual congressional dinner that includes members of the washington press corps and other elected officials. on c-span3, a confirmation hearing for two judges to be on the ninth circuit court of appeals in california. this is the second time the president has nominated daniel collins and kenneth lee after their nominations expired in the last congress. dianne feinstein and kamala harris oppose the nominees. watch at 10:00 a.m. eastern. later, the acting office of
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managing manager testifies on the trump administration's 2020 budget proposal. c-span, where history unfolds daily. in 1979, c-span was created as a public service by america's cable-television companies and today, we continue to bring you unfiltered coverage of conference -- of congress, the white house, the supreme court and public policy events in washington, d.c. and around the world. c-span is brought to you by your cable or satellite provider. >> the trump administration unveiled its 2020 budget request this week, proposing cuts to most areas of federal spending but three. the graph in washington post like president trump would to increase spending for homeland security by


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