Wells Fargo’s new CEO told Congress on Tuesday that the troubled bank engaged in “deeply disturbing conduct” but is charting a new path to move past its yearslong sales-practices scandal.
Chief Executive Charles Scharf sought to reset the political tone around the bank. He noted that he is putting in place a new management structure that increases oversight of each business line. He also said the bank has far more risk and compliance controls than when it was fined by regulators in 2016 for opening perhaps millions of fake accounts.
But Wells Fargo is still dealing with a mountain of regulatory problems, including an extraordinary cap on its growth.
“We need to run the company fundamentally differently than we have in the past,” said Scharf, a company outsider who was brought in less than five months ago and has bluntly and repeatedly criticised the way the bank was run.
Both Democrats and Republicans in the House Financial Services Committee appeared to give him the benefit of the doubt for most of the hearing. Few committee members expressed skepticism of his strategy and many allowed him to respond to questions by saying he was too new to the job to fully answer.
Toward the end of the hearing, some committee members took a harsher tone with Scharf. Rep. Katie Porter (D., Calif.) suggested the bank should do more to lift wages for bank tellers. Rep. Joyce Beatty (D., Ohio) urged Scharf to commit to more diversity on its board. Rep. Rashida Tlaib (D., Mich.) said he should take more ownership of what the bank did before he arrived.
“You cannot come here and continue to say ‘I’m new,’” Tlaib said.
Still, Scharf’s treatment was in stark contrast to Capitol Hill appearances by the previous two Wells Fargo CEOs, both of them longtime company veterans. Both stepped down shortly after appearing before Congress, where lawmakers including Sen. Elizabeth Warren (D., Mass.) blasted them for the fake-accounts scandal. Several members of Congress offhandedly said Tuesday they couldn’t imagine why anyone would want the CEO job at Wells Fargo.
Still, both Democrats and Republicans released reports last week saying the bank mishandled its obligations to fix the scandal. Scharf said the reports’ allegations, which generally predate his arrival, were “beyond disappointing.”
In the days ahead of the hearing, Wells Fargo announced a series of initiatives, including lifting its minimum wage in many markets and announcing a no-overdraft account, that were well received by some lawmakers.
“Just because the company has not been well run does not mean it can’t be well run,” Scharf told Congress.
Elizabeth Duke, the former board chairwoman, and James Quigley, another former board member, are expected to testify Wednesday. Both resigned after the release of the congressional reports, which accused them of a lack of urgency in addressing regulatory issues.
Wells Fargo shares rallied 8% Tuesday, their biggest one-day gain since 2011. The stock benefited from a broad rally that pushed the S&P 500 up 4.9% and also topped the KBW Nasdaq Bank Index’s 7.3% rise. It was the second-best performer among the six major US banks, after Citigroup Inc.