WASHINGTON — More than two years after Wells Fargo's consumer scandals first started coming to light, the congressional backlash facing the bank remains just as fierce, uniting both Democrats and Republicans.
That much was clear Tuesday from CEO Tim Sloan's second appearance before Congress to answer for the bank's notorious fake-accounts scandal, other wrongdoing that emerged after Sloan first hearing in 2017 and what steps the bank has taken to address its problems.
Less clear is what effect Wells' negative spotlight has on legislative policy. Regulators have instituted fines and imposed growth caps on the bank, among other things, and communicated their opinion that the bank has not sufficiently righted the ship.
But during the more than four hours of testimony, Democrats and Republicans on the House Financial Services Committee clashed over whether Wells' problems had anything to do with its size, as well as whether the bank's scandals should lead to new requirements for multiple institutions.
The committee even debated issues beyond the bank's consumer-related scandals and financial regulatory policy, such as Wells' financing of firearms companies.
Here are three key things we learned from the hearing:
Wells Fargo has not redeemed itself in Congress, and the scrutiny is still bipartisan
Under Sloan, who succeeded John Stumpf after the 2016 scandal involving the opening of 3.5 million bogus accounts, Wells has implemented several leadership changes and tried to reform how it manages internal controls.
But despite Sloan's attempts to defend the bank's progress, members of the House committee did not appear in the least convinced that the bank had sufficiently moved on from a faulty sales culture.
“Wells Fargo’s ongoing lawlessness and failure to right the ship suggest the bank, with approximately $1.9 trillion in assets and serving one in three U.S. households, is simply too big to manage,” said House Financial Services Committee Chairwoman Maxine Waters, D-Calif.
She pinpointed Wells' size as a contributing factor to its problems.
“All of the changes that you said that you’ve made are not evident,” Waters said. “And you do not have the kind of customer satisfaction that you’re alluding to. Is Wells Fargo too big to manage?”
The remaining scrutiny in part stems from additional scandals, such as allegations that the bank
Sloan said the company has positioned thousands of employees to fulfill requirements of consent orders brought by regulators and eliminated the sales product goals that contributed to the opening of the fake accounts, among other steps.
"We are taking responsibility not just for any fees customers should not have been charged, but also for related effects such as impacts on credit scores," Sloan said in his opening remarks. "Our guiding principle has been to err on the side of our customers, and we are taking an overinclusive approach in doing so. To be sure, getting this right for each customer takes time—longer than I would like, frankly."
Criticism of the bank from members of the committee was bipartisan.
“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,” said Rep. Ann Wagner, R-Mo.
Rep. Patrick McHenry of North Carolina, the committee's ranking Republican, said the removal of seven members of the bank's operating committee since February 2016, as well as the hiring of a new chief risk officer, were positive steps but not enough.
"That’s progress but obviously it hasn’t been enough to satisfy your regulators," he said. "You will hear bipartisan criticism of the actions you have taken and the failures you have overseen under your watch.”
The two parties could not be farther apart on policy implications
Despite the bipartisan frustration with Wells Fargo, Republicans and Democrats still aren’t on the same page when it comes to the policy implications of the bank’s misconduct.
Some Democrats continued to call for steps allowing regulators to break up large banks that violate consumer compliance rules — a bill authored by Waters would do just that — but Republicans opposed congressional intervention and instead criticized regulators for failing to detect and prevent the bank's wrongdoing.
Rep. Blaine Luetkemeyer, R-Mo., blamed the Consumer Financial Protection Bureau for being slow to identify the bank's problems.
“The initial problems that were disclosed and found by the regulators were actually reported by the Los Angeles Times,” Luetkemeyer said. “As a result, the regulators have dropped the ball in this whole situation and after the fact went into your bank and found some of the stuff that was going on as a result of these news reports. The CFPB, in particular, even after the other regulators went in, went in even later than that.”
Luetkemeyer said he thought it was appropriate for the CFPB to eventually fine Wells Fargo, but said the agency “should have been fined as well” for its “lousy regulation.”
Rep. Andy Barr, R-Ky., pushed back against some Democrats’ claims that the bank is too big to manage and needs to be broken up.
“You’ve obviously discontinued the incentive plan. ... It appears to me that none of these issues that contributed to the accounts scandal have anything to do with your institution’s size,” Barr said. “The issue in the institution was not a matter of size. It was a matter of culture. It was a matter of having an incentive program.”
Gun policies and immigration enforcement are now embedded in the partisan debate over banking policy
The hearing was not limited to Wells' consumer-based regulatory violations. Sloan also took heat from Democrats for its financing of firearms companies. Although the bank last month said it was curtailing investments in the private prison industry, which operates some immigration detention facilities, its ties to certain prison firms also came up at the hearing.
Rep. Carolyn Maloney, D-N.Y., criticized Wells Fargo for giving a line of credit to a manufacturer of AR-15 guns, the type of gun used at a massive school shooting in Parkland, Fla., last year. She suggested the bank was putting profits over people.
“We don’t put profits over people,” Sloan said in response. “We bank many industries across this country.”
Rep. Sean Duffy, R-Wis., took the opposite position, lauding the bank for serving legal firearms businesses.
“I want to thank you for saying you’re going to follow the law and the Second Amendment,” Duffy said. “We believe in our constitutional right to bear arms.”
