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The House Financial Services Committee on Wednesday said its yearlong investigation into Wells Fargo shows that board members fell down on the job of oversight and the bank's management didn’t take regulators’ demands seriously enough in the wake of multiple consumer abuse scandals.
The report by committee Democrats also slammed financial regulators, saying they knew for years about serious company-wide deficiencies in managing potential problems.
“This Committee staff report shines a much-needed spotlight on ‘The Real Wells Fargo,’ a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses,” Chairwoman Maxine Waters (D-Calif.) said in a statement.
The document comes just weeks after Wells Fargo paid a $3 billion fine to the Justice Department and the SEC in connection with the opening of millions of unauthorized customer accounts and admitted to unlawful and unethical practices spanning 14 years.
The bank, the fourth-largest in the country, has also been a target of bipartisan anger over actions ranging from charging hundreds of thousands of people for auto insurance they didn’t need to overcharging members of the military to refinance mortgages. It has also paid hefty penalties for those activities.
Waters is releasing the document ahead of two hearings next week with bank leadership, one with CEO Charles Scharf, who has led Wells Fargo since October, and one with two board members, Chair Elizabeth Duke and James Quigley.
In the release, the committee recommended congressional action, including compelling regulators to “act against recidivist banks,” strengthening regulatory authorities and enhancing the accountability of senior leadership, as well as requiring more transparency in bank supervision.
Members of the bank board “appeared reluctant to engage in oversight of the Bank’s efforts to comply with the 2016 Sales Practices Consent Orders,” the committee said in a press release on the report.
Committee staff pointed to notes from a Nov. 28, 2017, meeting between Duke, then-CEO Tim Sloan and general counsel Allen Parker, which indicate, “Duke questioned the CFPB’s practice of including her on letters requesting the Bank take certain actions: ‘Why are you sending it to me, the board, rather than the department manager?’”
The committee also referred to an email from former chief risk officer Michael Loughlin, who in January agreed to pay $1.25 million to the Office of the Comptroller of the Currency for his role in the bank’s misconduct.
According to the committee, Loughlin wrote in an email to former CEO Sloan: “If any of the $200MM [in proposed customer remediation] is left over, we promise to give it to charity — only after the CFPB and the OCC let us out of the consent orders. If they do not, no donation. Put the onus back on them.”
Loughlin did not admit or deny any wrongdoing as part of the OCC settlement.
Committee Republicans led by Rep. Patrick McHenry (R-N.C.) planned to publish their own report from the investigation and likewise place blame on the bank's management and board.
In an executive summary and a list of key findings released Wednesday evening, GOP committee staff said Sloan undermined the company's efforts to comply with regulatory consent orders requiring the bank to change its ways and that he made a series of "false and misleading public statements" about its progress.
But Republicans also argued that Wells was a grossly mismanaged outlier among large banks and not simply "too big to manage" — a criticism leveled by Democrats inclined to break up Wall Street giants. GOP investigators also criticized Obama-era regulators for being too slow to recognize risk at the bank, allowing the company's problems to worsen.
Zachary Warmbrodt contributed to this report.