Wed, July 06, 2022


In emails, Wells Fargo executives griped about scrutiny, mulled using charity as leverage

WASHINGTON - Last year, Wells Fargo's then-interim chief executive, Allen Parker, thought he had struck a deal.

Regulators had fined the bank $1 billion for consumer abuses, including opening millions of accounts consumers didn't want. A senior political appointee at the Consumer Financial Protection Bureau, Eric Blankenstein, told Parker that any additional investigations would be resolved privately - and without additional fines.

"Eric also assured me that there would continue to be 'political' oversight of the engagement with us," Parker said in an email to a member of the bank's board of directors.

The email exchange was uncovered during a year-long investigation of the San Francisco-based bank by the House Financial Services Committee that found widespread problems with how Wells Fargo and its board of directors have responded to more than three years of scandals in its operations. The backchannel communications between Blankenstein, the Trump administration appointee who resigned under a cloud, and Parker potentially undermined career bureau officials who were not aware of the arrangement, the more than 100-page report found.

Wells Fargo is "a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses," Rep. Maxine Waters, D-Calif., chair of the committee, said in a statement.

In a call with reporters, Waters said Thursday she was considering whether to refer the bank's former CEO, Tim Sloan, to the Department of Justice for making "misleading" statements while testifying before the committee last year.

"I am looking very closely at whether there will be a referral," she said.

Sloan, who now works as an adviser for Fortress investment group, could not immediately be reached for comment.

A Wells Fargo spokesperson, Jennifer Dunn, said the bank is still reviewing the report and declined to comment further. Blankenstein and Parker couldn't immediately reached for comment.

Wells Fargo's current CEO, Charles Scharf, is scheduled to appear before the House committee Tuesday, and two members of the committee's board of directors are scheduled to appear on Wednesday.

The report also found that the bank's regulators, including the Office of the Comptroller of the Currency and the Federal Reserve, were aware of the bank's problems for years before acting and that Wells Fargo was slow to address its problems. The bank's board of directors failed to hold senior executives accountable and appeared reluctant to become directly involved in resolving matters, the committee found.

In 2017, then-vice chair of Wells Fargo's board, Betsy Duke, questioned why CFPB was including her on emails about actions the bank needed to take, according to the report. "Why are you sending it to me, the board, rather than the department manager?" she asked a CFPB official in an email, according to the report.

A CFPB official later said Duke's response came as a "surprise" since board members "would not typically object to receiving communication from a regulator," according to the report.

Duke, who is now chairs the board, is scheduled to testify on Wednesday.

Waters said Thursday that she planned to call for the resignation of Duke and another board member, James Quigley. In an email, Quigley resisted attending a meeting about the bank's troubles because he was overseas on vacation. "Strong boards are essential to strong governance," Waters said. "They should be shown the door."

The report also states that Wells Fargo executives seemed more interested in getting out from under federal scrutiny quickly "instead of taking the necessary time to address the weaknesses" within the bank. In another email exchange included in the report, Duke appears to press bank executives to quickly resolve matters with regulators.

"After what I have seen in the last month, I believe our credibility and perhaps even viability as a company is dependent on successfully exiting these consent orders," she said in a 2018 email. "This is too good of a company to have to operate under the restrictions of a troubled one."

Among the country's largest and most profitable banks, Wells Fargo has struggled to overcome the sales scandal, which ballooned as the bank admitted to other consumer abuses, including mistakenly foreclosing on hundreds of clients and repossessing the cars of thousands of others.

Last month, the bank reached a $3 billion settlement with the U.S. Department of Justice and the Securities and Exchange Commission, acknowledging that for more than a decade thousands of employees falsified records, forged signatures, and misused customers' personal information in order to meet unrealistic sales goals, opening millions of accounts consumers didn't want in the process.

But the report is likely to reinforce Democrats' concerns the bank has not been aggressive enough in reforming its culture. In one 2017 exchange, the bank's former CEO was told about a plan to use a promised charitable donation as leverage to escape reforms it had already agreed to.

In the 2017 email, Michael Loughlin, then the bank's chief risk officer, discussed a plan for setting aside $200 million to compensate consumers harmed by its fake account scandal.

If any money was left over, the bank could give it to charity, Loughlin told then-CEO Tim Sloan, but only if Wells Fargo's regulators agreed to let the bank out of its consent orders. "If they do not, no donation. Put the onus back on them," he said.

In anticipation of next week's hearings, Wells Fargo has announced changes including that it would raise its minimum wage for thousands of its employees to between $15 and $20 an hour and begin offering accounts with no overdraft or insufficient funds fees.

But Scharf is likely to face a skeptical audience next week when he will become the third Wells Fargo CEO in three years to appear before Capitol Hill. His predecessors struggled under intense questioning from lawmakers and eventually were forced to resign.

"He has to demonstrate that he is an outsider and that he is actively working on the bank's problems," said Ed Mills, a Washington-based policy analyst with Raymond James. "It is one thing to have a plan on paper. It's another for its to hold up to congressional scrutiny."


Published : March 05, 2020