[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                    HOLDING WELLS FARGO ACCOUNTABLE:.
                   CEO PERSPECTIVES ON NEXT STEPS FOR
                  THE BANK THAT BROKE AMERICA'S TRUST

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 10, 2020

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-91
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


                                __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
42-866 PDF                  WASHINGTON : 2021                     
          
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             ANN WAGNER, Missouri
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            SCOTT TIPTON, Colorado
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
DENNY HECK, Washington               TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
RASHIDA TLAIB, Michigan              DAVID KUSTOFF, Tennessee
KATIE PORTER, California             TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa                     ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois                JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts       BRYAN STEIL, Wisconsin
BEN McADAMS, Utah                    LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia            WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts      VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 10, 2020...............................................     1
Appendix:
    March 10, 2020...............................................    71

                               WITNESSES
                        Tuesday, March 10, 2020

Scharf, Charles W., Chief Executive Officer and President, Wells 
  Fargo & Company................................................     5

                                APPENDIX

Prepared statements:
    Scharf, Charles W............................................    72

 
                    HOLDING WELLS FARGO ACCOUNTABLE:
                   CEO PERSPECTIVES ON NEXT STEPS FOR
                  THE BANK THAT BROKE AMERICA'S TRUST

                              ----------                              


                        Tuesday, March 10, 2020

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Clay, Scott, Green, Cleaver, 
Perlmutter, Himes, Foster, Beatty, Vargas, Gottheimer, Lawson, 
San Nicolas, Tlaib, Porter, Axne, Casten, Pressley, McAdams, 
Wexton, Lynch, Adams, Dean, Garcia of Illinois, Garcia of 
Texas, Phillips; McHenry, Wagner, Lucas, Posey, Luetkemeyer, 
Huizenga, Barr, Tipton, Williams, Emmer, Zeldin, Loudermilk, 
Mooney, Davidson, Budd, Kustoff, Hollingsworth, Gonzalez of 
Ohio, Rose, Steil, Gooden, Timmons, and Taylor.
    Chairwoman Waters. The Committee on Financial Services will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``Holding Wells Fargo 
Accountable: CEO Perspectives on Next Steps for the Bank that 
Broke America's Trust.''
    I now recognize myself for 4 minutes for an opening 
statement.
    Today, Wells Fargo CEO Charles Scharf will testify before 
the committee about how he plans to end Wells Fargo's egregious 
pattern of consumer abuses. He is now the third Wells Fargo CEO 
to testify before this committee in less than 3\1/2\ years. I 
will note that each time a Wells Fargo CEO has testified before 
this committee, he has resigned soon thereafter.
    Mr. Scharf, you have taken on a massive challenge. While I 
certainly wish you luck, it is clear to this committee that the 
bank you inherited is essentially a lawless organization that 
has caused widespread harm to millions of consumers throughout 
the nation.
    Wells Fargo has opened 3.5 million fraudulent accounts in 
their customers' names, which cost consumers over $6 million; 
charged consumers for automobile insurance policies they did 
not need, resulting in some consumers losing their automobiles; 
engaged in illegal student loan servicing practices; charged 
consumers inappropriate overdraft fees; overcharged veterans 
for refinance loans; and fraudulently sold complex financial 
products to retail investors.
    Last week, the committee released a Majority staff report 
on Wells Fargo's compliance with five consent orders issued by 
various regulatory agencies, in response to the company's 
widespread consumer abuses and compliance breakdowns. Among the 
disturbing findings uncovered in the report is that the Office 
of the Comptroller of the Currency (OCC) is aware of dozens of 
cases at Wells Fargo where the number of consumers or customer 
accounts requiring remediation for consumer abuse exceeds 
50,000, or the amount of harm exceeds $10 million.
    I am very concerned that the bank's pattern of harming its 
consumers appears to persist. The Majority staff report also 
uncovered notes from a May 2019 Federal Reserve meeting with 
Wells Fargo which reflect that a senior Wells Fargo executive 
stated, ``If you were CEO, you would not allow the addition of 
any new customers to the company, since the firm is operating 
in this environment.''
    Based on the findings of the Majority staff report, I agree 
with the sentiment that Wells Fargo is not ready to be 
America's bank again, and this is the challenge before you, Mr. 
Scharf. You must not only rebuild this institution, you must 
also rebuild America's trust in it, and that begins with your 
testimony today. When your predecessor testified before this 
committee, he gave inaccurate and misleading testimony. I urge 
you not to follow his example, but instead, to be transparent 
and honest.
    This hearing is the first of several the committee will be 
convening to hold Wells Fargo accountable. As part of this 
oversight, we will be looking at legislation to do just that. 
While the Federal Reserve's asset cap was a good start, it 
didn't seem to change the bank's behavior.
    Accordingly, we will discuss a number of bills that would 
compel further action by regulators and rein in abusive 
megabanks like Wells Fargo to hold them, including their 
management and boards, accountable for their actions.
    Thank you.
    The Chair now recognizes the ranking member of the 
committee, the gentleman from North Carolina, Mr. McHenry, for 
4 minutes for an opening statement.
    Mr. McHenry. Thank you, Madam Chairwoman. My colleagues on 
the other side of the aisle made up their minds about Wells 
Fargo long ago. In fact, before we received a single document, 
the now-Chair of the committee said in 2016 that she had, 
``come to the conclusion that Wells Fargo should be broken up. 
It is too big to manage.'' Again, that was before the committee 
received a single document or reviewed even a shred of evidence 
in the investigation of Wells Fargo's sales practices.
    Now, after reviewing half-a-million documents that both the 
Democrats and Republicans on this committee have access to, and 
hundreds of pages of witness testimony, we know that breaking 
up the bank is not the answer. Wells Fargo isn't too big to 
manage. The findings of these documents show that it was 
grossly mismanaged. The evidence shows the source of the 
company's problem was its federated structure and the 
leadership team who couldn't fix it.
    Those are the issues that are unique to Wells Fargo, and 
Wells Fargo is uniquely mismanaged. However, the evidence does 
not tell us much about Wells Fargo's large bank peers. So, we 
are going to spend all day hearing from Wells Fargo's brand new 
CEO, who has been on the job for all of about 6 months, and who 
has no connection to the period in question. And tomorrow, we 
are going to drag up two former board members for the sole 
purpose of embarrassing them, and there are documents that are 
deeply embarrassing to those board members and to the then-
board of Wells Fargo. That is true. The chairwoman called on 
them to resign and they did. In fact, the markets were calling 
on them to resign. The system works.
    I am not sure what we hope to accomplish tomorrow with 
witnesses who are no longer in a position to fix the company, 
moving forward. I would offer that we don't have the luxury of 
three politically-motivated, ideological hearings on Wells 
Fargo right now. There are serious things happening in the 
world while we are having this hearing. Investors' fears over 
the spread of coronavirus have had widespread consequences for 
the financial services industry, the economy, and the markets. 
Our constituents have real concerns and they expect us to put 
aside politics and focus on the urgent matter at hand. But we 
are going to spend the day asking Mr. Scharf over and over 
again how he intends to fix the bank.
    Here are the facts. Mr. Scharf and his team released a 
plan, and it looks good on paper. We will hold him accountable 
for executing that plan. In fact, his stockholders will hold 
him accountable for that plan. And the regulators and the 
Justice Department will hold him accountable for executing that 
plan. In fact, the regulators and the Justice Department have 
been extremely aggressive, during the Trump Administration, on 
Wells Fargo. We will continue to hear from them about whether 
or not Mr. Scharf's plans are working, and we expect them to 
stay engaged.
    I look forward to this hearing today, Mr. Scharf, but I 
think at least some of our Members will want to know what you 
are doing to prepare for your massive footprint of employees, 
how you are going to protect their safety, how you are going to 
protect the safety and soundness of your institution, given 
what is happening in the marketplace and the fears we have in 
reaction to this virus, and the impact that my constituents 
will face with changes to credit cards, mortgages, and other 
things in light of this crisis.
    With that, Madam Chairwoman, I would like to introduce four 
documents into the record. These are waivers to allow Mr. 
Scharf to discuss certain confidential supervisory information 
(CSI). These documents were issued by the CFPB, the OCC, and 
the Federal Reserve. There are two important notes about these 
waivers. First, they are not blanket waivers to discuss CSI. 
Mr. Scharf was asked not to discuss OCC's CAMELS ratings, OCC's 
risk assessments, and the Fed's supervisory ratings.
    Second, he has been asked not to name supervisory staff. I 
think it would be unfair to put him in a position to either 
answer our question or violate regulatory directives.
    Mr. Scharf, I appreciate you and your company requesting 
these waivers so that you could be more forthright with this 
committee, and with that, I ask unanimous consent to submit the 
March 6th letter from the CFPB, the March 5th letter from the 
OCC, and the 2 March 6th letters from the Federal Reserve 
detailing what I have outlined.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. McHenry. Thank you.
    Chairwoman Waters. I would also like to know if you have 
permission to disclose the waivers. I understand the agency has 
asked us not to do that?
    Mr. McHenry. Well, I was not asked by the agencies to not 
do that, and so therefore, I have just said in public what they 
outlined. These are letters to you and Mr. Green, and I am cc'd 
on them. Had they made that request, I would have liked to have 
heard it before announcing it here to you today, and to 
everyone on this committee.
    Chairwoman Waters. Well, that is what I understand.
    Mr. McHenry. But I think it is--
    Chairwoman Waters. And we have already heard 5 hours of 
testimony from then-CEO Stumpf, when I called for Wells Fargo 
to be broken up, so I would like to clear the record on that.
    Without objection, your information is inserted into the 
record.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, who is also the Chair of our Subcommittee on Oversight 
and Investigations, for one minute.
    Mr. Green. Thank you, Madam Chairwoman. Madam Chairwoman, 
my constituents would like to know how it is that Wells Fargo 
can pay a $3 billion fine, commit fraud, open accounts without 
the knowledge of customers, and not one person goes to jail. Of 
all of the top banks, the so-called too-big-to-fail banks, 
there has never been a CEO or a top officer of any of these 
too-big-to-fail banks who has gone to jail. It seems that they 
are not only too-big-to-fail; they are also too-big-to-jail.
    This issue has to be resolved, and it cannot be resolved by 
simply paying off the government. Wells Fargo has to do more to 
atone for its transgressions, which will involve how it treats 
its employees, what it will do to make sure that this never 
happens again, but more importantly than all of these, Wells 
Fargo has to understand that it cannot continue with what 
appears to be a criminal enterprise.
    I yield back the balance of my time.
    Chairwoman Waters. The Chair now recognizes the 
subcommittee ranking member, Mr. Barr, for one minute.
    Mr. Barr. Thank you, Chairwoman Waters, and Ranking Member 
McHenry. Mr. Scharf, welcome back to the committee for your 
appearance in your new and current role. The scandals plaguing 
Wells Fargo, and senior management's failure to address the 
problems and their aftermath, represented a breach of public 
trust and a significant shortfall in consumer protection. We 
are not here to re-litigate the details of those practices, 
which the committee covered in previous hearings and reports. 
We are here to understand what the new management has done to 
correct mistakes of the past, how they are complying with 
regulators' directives, and their plans to ensure this doesn't 
happen again.
    Wells Fargo's individualized misconduct sparked unfair 
anti-bank rhetoric that has been applied to all banks of all 
sizes, much of which you will hear from my colleagues today. 
But labeling all banks as the villains of capitalism makes it 
easier for some on the far left to justify their quest to 
impose socialism on our free market economy and politicize 
access to capital. We are here to focus on only one isolated 
bank and its path to rebuild trust.
    Mr. Scharf, I look forward to learning about the work you 
have done to change the culture at the bank, and to working 
with you to ensure that Wells Fargo upholds its promises.
    I yield back.
    Chairwoman Waters. I want to welcome to the committee 
Charles W. Scharf, president and chief executive officer of 
Wells Fargo & Company. Mr. Scharf has held this position with 
Wells Fargo & Company since October 2019. Previously, Mr. 
Scharf served as a senior official at a number of financial 
institutions, including as chief executive officer at Visa 
Incorporated, and as chief executive officer and chairman of 
the board at Bank of New York Mellon.
    Without objection, your written statement will be made a 
part of the record, but before we begin, I would like to swear 
the witness in. Mr. Scharf, please stand and raise your right 
hand.
    Thank you. 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 whole truth, and 
nothing but the truth, so help you God?
    [Witness sworn.]
    Thank you. Let the record show that the witness answered in 
the affirmative. You may take your seat.
    Mr. Scharf, you will have 5 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 that we can be respectful of the committee 
members' times.
    Mr. Scharf, you are now recognized to present your oral 
testimony.

  TESTIMONY OF CHARLES W. SCHARF, CHIEF EXECUTIVE OFFICER AND 
                PRESIDENT, WELLS FARGO & COMPANY

    Mr. Scharf. Chairwoman Waters, Ranking Member McHenry, 
members of the committee, good morning. Thank you very much for 
the opportunity to be here today. I joined Wells Fargo just 
over 4 months ago, after serving as CEO of BNY Mellon, and 
Visa, and while it is early days, I welcome the opportunity to 
discuss the next steps for Wells Fargo.
    The members of this committee are familiar with Wells 
Fargo's history. Our failings have been detailed recently in 
both the settlement with the DOJ and the SEC, as well as the 
administrative actions taken by the OCC against former 
employees. These matters describe deeply disturbing conduct 
that is utterly unacceptable and has no place in our company.
    In addition, the recently released reports from this 
committee reinforced what I have said since I arrived, that we 
have not done what is necessary to address our shortcomings. 
Simply said, we had a flawed business model in how the company 
was managed. Our structure and culture were problematic, and 
the company's leadership failed its stakeholders.
    But today, I would like to talk to you about our plan to 
chart a better course. I took this job because I believe that 
our country and our communities benefit from a strong Wells 
Fargo. I am confident we can do what is necessary to move this 
company in a significantly improved direction. While it will 
take time, the transformation has begun, and I realize the path 
forward will be difficult. And though I realize the path 
forward will be difficult, I am optimistic of our future.
    Here are some important steps we have taken so far. First, 
I provided an honest assessment, both internally and 
externally, of our significant shortcomings and our failure to 
effectively address them.
    Second, I made it clear, also internally and externally, 
that we must prioritize the work outlined by our regulators 
above all else. Completing that work is essential to ensuring 
the company is run with the highest standards of both 
operational excellence and integrity.
    Third, I am making substantial changes to our leadership 
team. I brought in three new leaders and expect to add two more 
soon from outside the company to join our operating committee. 
Almost 75 percent of that group will be new to the company 
since 2018. Hiring experienced people with proven track records 
in the issues we face is necessary to bring about the change 
required.
    Fourth, we reorganized the structure of our businesses to 
ensure we have clear responsibility and accountability. We 
created a new role, chief operating officer, who will ensure 
that high-quality, consistent execution and operational 
excellence become part of our culture, especially with regard 
to our regulatory work. We announced a flatter organizational 
structure with more direct representation on our operating 
committee. This will give me clear line of sight and more 
direct involvement across the company. It will also provide 
greater transparency into how our businesses are working, what 
kinds of risks they are taking on, how they are treating 
customers, and whether they are operating at the highest 
standards.
    Fifth, we are introducing a new set of processes to 
thoroughly review our progress against our regulatory work.
    Sixth, we altered our evaluation and compensation practices 
and have significantly greater accountability, and will 
continue to make tough decisions around our leaders.
    Seventh, we are redefining our culture, especially 
regarding how we work together. We will have a strong 
centralized control infrastructure. We will ensure we have the 
right people in the right roles. We will move with a sense of 
urgency, we will hold each other accountable for our 
commitments, and we will judge ourselves based upon our 
outcomes, not our words.
    But most importantly, the guiding principle in how we make 
business decisions must be that everything starts and ends with 
our customers. We must put them first in our decision-making in 
all we do.
    As we move forward, I have no preconceived notions about 
what size our bank should be, but I firmly believe that we must 
be able to manage all of it. I also know that progress in our 
plan will take time, and that ultimately our regulators will 
decide when we have met our obligations under the consent 
orders. My commitment to our regulators is that we will 
approach this work with the greatest sense of urgency.
    To my colleagues at Wells Fargo, you deserve more from the 
bank's leadership, and the failings that occurred in the past 
have made your jobs difficult. I am committed to doing better 
as we seek to ensure that such things never occur again at 
Wells Fargo.
    And to the committee, I want to give you my personal 
assurance that we will do the work necessary to put Wells Fargo 
on a sound footing with our customers, employees, regulators, 
shareholders, and communities.
    Thank you, and I am happy to answer your questions.
    [The prepared statement of Mr. Scharf can be found on page 
72 of the appendix.]
    Chairwoman Waters. Thank you very much. I would now like to 
engage you with a few questions that I have about some of the 
findings that were reported in the investigation that was done 
by the Majority staff. According to the committee's Majority 
staff report, there are currently dozens of consumer abuses 
that each affect more than 50,000 customers or accounts, or 
require more than $10 million in remediation.
    Mr. Scharf, this was one of the most troubling findings of 
the report, because after more than 3\1/2\ years under consent 
orders, Wells Fargo may still be harming millions of consumers.
    Exactly how many consumers were harmed by the bank as a 
result of the dozens of abuses cited in the report?
    Mr. Scharf. Chairwoman, I do not know the answer to that 
question.
    Chairwoman Waters. Will any consumer who has been harmed by 
the bank and identified receive payment and have their credit 
report fixed within the next 30 days?
    Mr. Scharf. Chairwoman, taking care of our customers is the 
most important thing for us. We are in the process of doing all 
of the work that is required of us to remediate everything that 
we possibly can. It will certainly take longer than that, but 
the process has to be complete, it has to be thorough, and we 
are committed to doing it.
    Chairwoman Waters. How long will it take for these 
consumers to receive payment and to have their credit reports 
fixed? I asked about 30 days. You will not answer that 
directly. About how long do you think it will take?
    Mr. Scharf. Chairwoman, as of now, our plans take us into 
2021 to ensure that all of the payments are made appropriately. 
We are taking a fresh look at how we do remediation, to make 
sure that we are being as thorough as we possibly can, and 
remediate everyone we should, and to ask the question, are 
there changes that we can make to our processes to get this 
done more quickly?
    Chairwoman Waters. My concern has only deepened in the past 
week as I think about the millions of customers who will be 
looking to Wells Fargo to support them through the economic 
pain inflicted by the coronavirus. While Wells Fargo and its 
foundation have offered about $11 million to support efforts to 
combat the virus, megabanks like yours will be asked to 
forebear payments on mortgages, credit cards, and other 
consumer debts.
    How can your customers, regulators, Congress, and the 
public have any confidence in your institution's ability to 
support your customers when you have dozens of ongoing 
instances of consumer abuse?
    Mr. Scharf. Chairwoman, I appreciate and understand the 
question. All I can tell you is that we are approaching the 
virus, I think in the way you would expect us to, which is, we 
are thinking about it in terms of what it really means for 
every American out there. That is certainly how I think about 
it, and starting with those who are the most affected.
    And so as we think about what we could be doing relative to 
late fees, missed payments, and things like that, we want our 
customers to believe that we are a source of strength for them, 
and we are going to approach it that way.
    Chairwoman Waters. I know that you understand we will be 
looking for a lot more specificity than you have just 
described.
    Now, I know that you became CEO just 4 months ago, and that 
you think that there are lots of changes needed at Wells Fargo. 
However, I think that absent significant reductions in Wells 
Fargo's footprint, you and the bank will never be able to rein 
in the culture of consumer abuse.
    What can you tell us about reducing the footprint?
    Mr. Scharf. Chairwoman, what I can tell you is that we sold 
off businesses over the last several years, and we continue to 
look at what the makeup of the company is. My first priority 
since I arrived at the company only 4 months ago, as you 
mentioned, is to ask the questions around, what do we have to 
do to get the regulatory work in far better shape than it is?
    At the same time, we have launched a series of meetings 
where we are looking across the company at what we do, to 
answer the question, does everything belong under the roof at 
Wells Fargo? And just given the priorities that I have, my 
expectation is that it will take through the end of the year to 
accomplish that work.
    Chairwoman Waters. As you know, there is a cap on the 
assets of the bank. Have you been trying to undo that since you 
have been in, or have you left it alone? Do you think that it 
is fair?
    Mr. Scharf. I don't have any knowledge of us trying to do 
anything other than abide by it, although we obviously are 
trying to do the work necessary to satisfy our regulators. I 
believe that given where we are, it is appropriate, and I am 
focused on getting the work done that is required by the 
Federal Reserve.
    Chairwoman Waters. Thank you. I yield back the balance of 
my time. The gentleman from North Carolina, Ranking Member 
McHenry, is recognized for 5 minutes.
    Mr. McHenry. Thank you for your testimony. We understand 
your plan, as you outlined it. You have outlined this to the 
markets. You have outlined it to committee members. You have 
outlined briefly in your opening statement your intentions to 
right this ship, to remedy customer harm as quickly as 
possible, to comply with regulatory orders.
    The failure of Wells Fargo is not a failure of some sort of 
innovation. It was a lack of it, a lack of adapting to the new 
marketplace, a lack of adhering to existing laws and regulatory 
orders, and when regulators called out the institution on those 
breaking orders, they refused to comply in a timely manner. 
Therefore, your last CEO, your predecessor, was bounced as a 
result of that.
    Both Democrats and Republicans on this committee have 
issued reports. Here is the Republican report. So in this 
report, we outlined the consumer harm and the risk management 
failures of your institution. Have you reviewed both of these 
reports?
    Mr. Scharf. Yes, I have.
    Mr. McHenry. Okay. I know you may disagree with some 
conclusions that we have, in terms of policy, for the 
Republican side or the Democrat side, but as to the findings of 
fact, do you have any disagreements with the Democrat report or 
the Republican report?
    Mr. Scharf. I do not, and the only thing I would add is my 
reaction to what is in those reports is probably very similar 
to yours.
    Mr. McHenry. Which is what?
    Mr. Scharf. Which is that the series of behavior that is 
described should have never happened at the company. The 
failures that are described are a direct result of us not 
managing the company properly. I do believe that it is possible 
to manage the company differently to fulfill the 
responsibilities that we have. But it is clear, when you read 
the report, and I said during my opening statement that it is 
consistent with what I found since I arrived at the company, 
that we have not done what needs to be done, but it is possible 
to do it.
    Mr. McHenry. Okay. I want to zero in on this federated 
structure, as you outlined in your plan, that you intend to 
create an enterprise-wide risk control system, similar to your 
peers. Is that true?
    Mr. Scharf. Yes, it is, Ranking Member McHenry.
    Mr. McHenry. Why?
    Mr. Scharf. Because there is no way that a company with 
multiple businesses can ensure that it is doing the right thing 
across the entire enterprise unless you are taking a consistent 
view of that.
    Mr. McHenry. So you need greater visibility into risk 
across the enterprise?
    Mr. Scharf. Yes, you need greater visibility, and you need 
a group of folks who are independent of the businesses 
concurring or not and making judgments.
    Mr. McHenry. Okay. Along those lines, your experience in 
your previous roles, CEO roles--you are trying to bring that 
expertise in risk management to this enterprise?
    Mr. Scharf. Absolutely, as well as the practices of other 
large institutions that have done this.
    Mr. McHenry. Okay. So in light of what has happened in the 
marketplace, in the broader market over the last month, is this 
institution well-capitalized?
    Mr. Scharf. Ranking Member, I think we are extremely well-
capitalized. In fact, there is no question that the whole 
banking system is far better capitalized than it was back at 
the time of the financial crisis, whether it is the additional 
$1 billion of capital that the banks have or the $3 trillion or 
so in deposits, and the liquid securities that the institutions 
have.
    Mr. McHenry. And you have access to liquidity sufficient to 
get through any crisis you would foresee?
    Mr. Scharf. Yes, absolutely, we believe that.
    Mr. McHenry. In terms of safety and soundness, you are 
mitigating customer harm from the previous regime. That is 
positive. In terms of safety and soundness and risk management, 
you are cleaning up the ship. So our expectation is that we 
should have no problems from you in terms of safety and 
soundness. Is that fair?
    Mr. Scharf. I think it is fair to say that once we finish 
the work that I have laid out, absolutely, you should feel that 
way.
    Mr. McHenry. Okay. How many employees do you have at Wells 
Fargo?
    Mr. Scharf. I have approximately 265,000.
    Mr. McHenry. And how many are customer-facing employees?
    Mr. Scharf. I don't know the exact answer, but it has to be 
easily 100,000.
    Mr. McHenry. So do you have plans in order to respond to 
the current threats because of COVID-19 and what is happening 
across the country, especially in your footprint in California?
    Mr. Scharf. Absolutely. We are, as I said--
    Mr. McHenry. As well as Washington State and other prime 
areas that are seeing an outbreak.
    Mr. Scharf. Our approach on COVID-19 is that we should do 
anything that we can to ensure the safety of our employees as 
well as be helpful for our customers. We have an open line with 
them. Wherever there is any concern, we encourage folks to work 
from home. I believe yesterday, we had 62,000 people logged in 
working from home, and to the extent that there are issues 
within the institution, we are going to do everything we can to 
protect everyone else.
    Mr. McHenry. Thank you.
    Chairwoman Waters. Let the record show that during this 
investigation, all of the information was shared with the 
Republicans, and they tried to rush a report out before we got 
ours out. The ranking member would like to have it both ways.
    Mr. McHenry. Madam Chairwoman?
    Chairwoman Waters. The gentlewoman from New York--
    Mr. McHenry. Point of personal privilege, Madam Chairwoman.
    Chairwoman Waters. Point of personal privilege.
    Mr. McHenry. We both issued reports, both the Majority and 
the Minority, as I outlined in my statement. I was not 
impugning your report. I was impugning the conclusions of your 
report.
    Chairwoman Waters. Whatever you were doing, Mr. McHenry, 
you are trying to have it both ways. You are saying that--
    Mr. McHenry. We can have this debate in front of everyone 
or we can get on with the hearing.
    Chairwoman Waters. Yes, we can. And as the Chair of the 
committee, if you want to have this debate, we will have this 
debate.
    Mr. McHenry. But you issued a report--
    Chairwoman Waters. The gentlewoman from New York--
    Mr. McHenry. --with similar findings--
    Chairwoman Waters. --Mrs. Maloney, is now recognized for 5 
minutes.
    Mr. McHenry. Don't take shots at me without giving me the 
opportunity to respond.
    Chairwoman Waters. You have responded. The gentlewoman from 
New York is now recognized.
    Mrs. Maloney. I thank the chairwoman for yielding. Mr. 
Scharf, you were brought in to clean things up and to change 
the culture at Wells Fargo, and I certainly hope you do. I 
would like to talk about one area where I believe you do need 
to change direction. When your predecessor, Tim Sloan, 
testified last year, I asked him about Wells Fargo's policies 
on financing the gun industry, policies which are absolutely 
egregious. Your bank has been financing gun manufacturers that 
are making weapons that are literally killing our children and 
our neighbors.
    Mr. Sloan said that he didn't think Wells Fargo should, 
``go above and beyond what the law requires on guns,'' even 
though the bank explicitly states that it goes above and beyond 
the law in many areas, including human rights. So, he refused 
to revise Wells Fargo's policies on financing the gun industry.
    Many of your competitors, such as Citibank and Bank of 
America, already have sensible policies to ensure responsible 
lending to their businesses with the gun industry. Under the 
Citi policy, all of the bank's business partners in the gun 
industry must require a background check before they sell a 
firearm, and they prohibit the selling of firearms to 
teenagers. These, I believe, are common-sense policies that 
will increase public safety and save lives.
    So I want to ask you, will you commit to changing Wells 
Fargo's policy on financing the gun industry?
    Mr. Scharf. Congresswoman, first of all, I do want to say I 
share your concerns about the impact of guns. Sitting here 
today, I don't personally believe that I know enough to make 
that commitment, but I know that is something that we need to 
be far more thoughtful about. I know that we have created some 
financing for some nonpartisan research, and as part of that we 
need to go back and to make sure that we are thinking about 
what the right thing to do is, in a series of sensitive 
industries. And I am not making a judgment one way or the 
other. It is just not something that I have spent enough time 
on yet, but I recognize your concerns.
    Mrs. Maloney. Thank you, and after you have reviewed this 
policy and made your decision, will you get back to the 
committee in writing about your decision and the reasons for 
making that decision, respectfully?
    Mr. Scharf. Yes, Congresswoman.
    Mrs. Maloney. Thank you. In the committee staff report 
there is an email, and I want to compliment the committee on 
this excellent report that has gotten really a lot of positive 
feedback. But in it there is this email from your chief risk 
officer, Michael Loughlin, where he said, ``If any of the $200 
million 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 order. If they do not, no donation. 
Put the onus back on them.''
    So essentially, your chief risk officer was trying to play 
hardball with the regulators over compensating the victims of 
the fake accounts scandal and over a charitable donation. Mr. 
Scharf, this committee really expects you to do the right thing 
by your customers that your bank has defrauded, and we expect 
you to work with your regulators to compensate them for the 
scandals and the misuse of their funds and other frauds.
    So I want to ask you, since you took over as CEO in October 
of 2019, what specific actions have you taken to address the 
OCC's concerns about how the bank remediates harm to consumers?
    Mr. Scharf. Thank you, Congresswoman. First of all, the 
gentleman you referred to is no longer the chief risk officer 
of the company, and certainly, when I read those comments, they 
are inexcusable and not something that should ever be thought 
by someone inside of our company.
    To your question about what we are doing, first of all we 
put in someone new to run our remediation process. That person 
reports to our new chief operating officer whom we brought in 
from the outside, who has experience in dealing with customer 
remediations. And the mandate I have given them is to rethink 
what it is and how we do it. Don't stop the work that is 
ongoing, but going through piece by piece and asking the 
question, what can we do to ensure that we are doing everything 
we can for all of our customers as quickly as we possibly can?
    Mrs. Maloney. Thank you. Earlier, you were asked how many 
people were defrauded. Do you know now? At that time, you did 
not know.
    Chairwoman Waters. The gentlelady's time has expired.
    Mrs. Maloney. Could you please respond in writing?
    Chairwoman Waters. The gentlewoman from Missouri, Mrs. 
Wagner, is recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman. Mr. Scharf, thank 
you for joining us today to update this committee on your 
progress as the brand new CEO of Wells Fargo.
    Placing one's money and wealth in the custody of an 
organization like Wells Fargo is one of the biggest displays of 
trust, and for many years consumers were betrayed and taken 
advantage of in order to meet sales performance goals, and 
ultimately to improve earnings and share prices. That was 
categorically wrong. Not only did Wells Fargo and its employees 
fail these customers, some of whom are my constituents in 
Missouri's Second Congressional District, but our regulators 
failed as well. They neither identified nor prevented this 
malpractice from occurring in the first place.
    It was not the Obama Administration's OCC and CFPB that 
first uncovered this problem. It was, in fact, the L.A. Times, 
the media, that first brought your company's practices to 
light.
    Mr. Scharf, your predecessors appeared before this 
committee and assured members that Wells Fargo was on track to 
complying with financial regulators' consent orders. The 
evidence outlined in the third report, produced by committee 
Republicans regarding Wells Fargo, says otherwise. Your 
predecessor was overly optimistic about the bank's progress 
towards complying with the CFPB and OCC consent orders, and the 
Federal Reserve Board's asset cap. His public statements 
assuring the bank's progress towards achieving compliance did 
not match up with what was taking place behind the scenes.
    Mr. Scharf, I am cautiously optimistic that you are the 
right man for the job, to bring the bank into compliance and 
put these scandals to rest. What makes you different from your 
predecessors, to adequately address and resolve these deep-
seated issues within Wells Fargo?
    Mr. Scharf. Thank you, Congresswoman. First of all, I have 
been lucky enough, through my career, to have a series of 
experiences at companies that have been both well-run and 
troubled, and coming out of those experiences, I believe that 
there are a series of things that I have learned that could be 
very applicable here.
    The things that I have done since I have come to Wells 
Fargo I think are in stark contrast to how we have approached 
some of these issues in the past. I think if you are inside the 
company, you feel like we are approaching these issues very, 
very differently. I have been very, very open and honest about 
our lack of progress, not pointing out the positives but both 
being realistic but also focusing on the negatives, because 
that is where we can have an impact.
    I believe the sense of urgency that people are working with 
inside the company is very different today than it was 4 months 
ago. I personally am spending the majority of my time on these 
issues, easily 75 to 80 percent of my time, not focused on 
growth, new businesses, or anything like that.
    Mrs. Wagner. Excuse me, Mr. Scharf, I am not hearing any 
specifics here. What other changes are you going to implement? 
Wells Fargo's fragmented structure proved to be one of the root 
causes, I think, of the bank's ongoing compliance challenges. 
Can we expect to see additional changes to address major 
outstanding issues? Some specifics, please.
    Mr. Scharf. Absolutely. We are going to have a much 
stronger centralized core in everything that relates to risk 
and control. We are going to run the company as if it is one 
company, with a consistent set of standards, a consistent set 
of policies. Everyone understands that, and we are going to 
have people in place who believe that is the best way to run 
the company.
    Mrs. Wagner. The committee's report found that Wells Fargo 
routinely requests extensions to deadlines for submitting 
remediation and reform plans. Regulators typically grant those 
requests but the bank's plans remain insufficient, even with 
the extra time.
    Mr. Scharf, what steps are you taking to ensure that Wells 
Fargo can submit these plans on time without deadline 
extensions, and are you still using these consultant 
contractors to draft plans to the CFPB and the OCC, under the 
consent orders?
    Mr. Scharf. In addition to the things I just mentioned, 
Congresswoman, we are putting a substantially different group 
of people in charge of these issues. I personally, and the 
operating committee, are getting deeply involved in all of 
this. It is going to take time, because as you know there are a 
series of orders that are outstanding, but we are trying to be 
as methodical as we can, going through piece by piece, and 
managing it in a very different way, in a very tight way, just 
like you would manage any significant project in an institution 
like Wells Fargo.
    Mrs. Wagner. I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from New 
York, Ms. Velazquez, is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman. Mr. Scharf, I 
don't like being misled, and I don't really like being lied to. 
Last year, I asked your predecessor about the status of Wells 
Fargo compliance with the Federal Reserve's 2018 consent order. 
He responded to me by stating that Wells Fargo had made the 
board governance and oversight improvements required by the 
Fed. We now know that is not true.
    As the new CEO, let me ask you, when do you expect Wells 
Fargo to be in compliance with the Fed's 2018 consent order?
    Mr. Scharf. Congresswoman, I can't give you an answer to 
that sitting here today. Ultimately, when they believe we are 
in compliance is what is important, not when we believe we are 
in compliance. What I can tell you is we have an enormous 
amount of resources working on this. We are highly focused on 
it, as am I. But I cannot sit here today and give a time frame.
    Ms. Velazquez. Mr. Scharf, according to correspondence 
between Wells Fargo officials and the Fed, Wells Fargo will 
resubmit plans to address governance and risk management by 
April 30, 2020. Do you still expect to resubmit a plan by April 
2020?
    Mr. Scharf. Congresswoman, I can't answer that question 
today. We are focused on doing the work that is necessary, as 
we review it. If we feel that it is in the condition that they 
would expect--
    Ms. Velazquez. So, your answer is no. Wells Fargo has 
already submitted two plans that have been rejected by the Fed 
and have been granted numerous extensions. Why will Wells Fargo 
not meet this deadline? Do you think we have a right to know?
    Mr. Scharf. Congresswoman--
    Ms. Velazquez. This is your deadline, by the way, sir. This 
is Wells Fargo's deadline.
    Mr. Scharf. Congresswoman, I understand exactly why you 
feel the way you do. What I can tell you is what I have 
discovered since I have gotten to the company, and my 
obligation is to make sure we are doing all the work that is 
necessary and being as honest as we can about what we can get 
done in what period of time.
    Ms. Velazquez. So, sir, as we have been discussing, and you 
are the third CEO to come before this committee, Wells Fargo's 
failure to comply with the Fed's 2018 consent order derives 
from a culture that is focused on profits instead of risk 
management. As the new CEO, how will you emphasize operational 
risk management over profits at Wells Fargo?
    Mr. Scharf. Congresswoman, I think it is both in our words 
and our actions. I have said publicly, including on my first 
investor call, that this work will come ahead of everything 
else, and our financial results might be harmed because of 
that.
    Ms. Velazquez. That is exactly what this committee expects 
from you. You set a deadline of April 2020. That is the type of 
action that we need. A few consumers were misled and charged 
excessive fees for accounts that they didn't sign up for. So 
yes, I agree with the ranking member that we should be 
concerned about coronavirus, and your workers, and for that 
fact and for that matter, workers across America. But you are 
responsible for the fact that too many consumers were 
overcharged for products that they didn't sign up for. And you 
are the third CEO.
    My question is if there is anything else that might be 
coming to light in terms of wrongdoing?
    Mr. Scharf. Congresswoman, not that I am aware of, and I 
share the concerns that you have and agree that we have to do 
far better than we have done.
    Ms. Velazquez. Madam Chairwoman, I yield back, and thank 
you for holding this hearing, fulfilling our responsibility of 
oversight.
    I yield back.
    Chairwoman Waters. Thank you. Mr. Scharf, I would like you 
to be as specific as you can possibly be about what you are 
doing to correct what was done to the consumers and how they 
are going to be repaid for it, in the questions that will come 
back to you time and time again today.
    The gentleman from Kentucky, Mr. Barr, is recognized for 5 
minutes.
    Mr. Barr. Welcome back to the committee, Mr. Scharf. You 
are new to Wells Fargo but you are not new to the job of 
running a global systemically important bank (G-SIB). You 
recently left the position of chief executive officer of BNY 
Mellon, another G-SIB. And given your past experience running a 
large and sophisticated global institution, do you believe that 
Wells Fargo is too big to manage, as some of my colleagues are 
suggesting?
    Mr. Scharf. No, I don't, Congressman.
    Mr. Barr. What do you believe contributed more to Wells 
Fargo's past failures? Do you believe it was more of the 
culture and the management structure that was in place in the 
past, or do you believe it was the size of the institution?
    Mr. Scharf. Congressman, there is no question in my mind 
that it was the culture and the management structure of the 
company.
    Mr. Barr. Because my friend from New York brought it up, I 
have to ask, do you believe that Wells Fargo's policy on 
financing firearms had anything whatsoever to do with the 
aggressive sales practices and the opening of unauthorized 
accounts?
    Mr. Scharf. Not at all, to my knowledge.
    Mr. Barr. I will say, just as an editorial comment, I 
believe that if your bank allows politics to impact lending 
decisions, it runs the risk of only distracting your bank from 
actually doing the things that you need to do to--
    Mrs. Maloney. Will the gentleman yield?
    Mr. Barr. --no, I will not--take on the task at hand, which 
is to reform the culture at the bank and to reform the 
management structure that you have identified as the problem. 
So please, I urge you to resist the temptation to politicize 
lending and focus on the actual issues at the institution.
    Let me ask you, in the past Wells Fargo maintained a 
federated model in which core functions such as risk management 
were decentralized within business lines with little visibility 
from or accountability to Wells Fargo company leadership. This 
was a key management breakdown identified in the Republican 
report published last week.
    I understand that the company has moved to build out an 
enterprise-wide risk program like many of your peers. I think 
you have identified this as a flatter organizational structure. 
Is that correct?
    Mr. Scharf. Yes.
    Mr. Barr. How will this flatter organizational structure 
correct the mistakes of the past?
    Mr. Scharf. Congressman, I think it is a combination of 
both of the things that you referred to. I think there is no 
question that we need an independent control infrastructure 
that is not accountable to any individual line of business, and 
in the case of risk and the other functions like that, are 
accountable directly to our board of directors.
    That group is independent, makes independent judgments, and 
in combination with the management team around my table, where 
we have more direct exposure into the issues, because you have 
people at the table talking about them, allows us to be much, 
much more engaged with the independent control infrastructure 
at the same table, hearing the same thing, and having the 
ability to influence things before they become a problem.
    Mr. Barr. Mr. Scharf, under your predecessor, Wells Fargo's 
responses to regulators' consent orders left something to be 
desired. They were late, incomplete, and totally insufficient. 
I think you have testified that you agree to that. Further, the 
teams managing the consent order deliverables were frequently 
shifted around the organizational chart at Wells Fargo and 
subordinated within teams, suggesting a low relative importance 
in the overall pecking order. You have committed to maintaining 
a more hands-on oversight of the consent order process and to 
working with regulators to ensure sufficient, timely compliance 
with your directors.
    I think your testimony was that you are going to take this 
up on an urgent basis--``Urgent'' was your word. Would you 
please describe the changes you have made to the teams managing 
Wells Fargo's response to these various consent orders?
    Mr. Scharf. We have centralized the management of all of 
these consent orders under our new chief operating officer, who 
came in from the outside, and who has extensive experience in 
his prior role of dealing with similar issues. Under him, we 
have an organization that is organized around the work that has 
to get done for the consent orders. That structure is very 
different than what we have had in the past.
    Mr. Barr. Thank you. My time has almost expired. I agree 
with you when you say, ``I believe that our country and 
communities would benefit from a strong Wells Fargo.'' I wish 
you all the best as you make these very important changes to 
correct these failures in the past, and I yield back.
    Chairwoman Waters. The gentleman from California, Mr. 
Sherman, who is also the Chair of our Subcommittee on Investor 
Protection, Entrepreneurship, and Capital Markets, is now 
recognized for 5 minutes.
    Mr. Sherman. The ranking member attacks the work of this 
committee, while at the same time saying it is great that these 
two directors were forced to resign because there were highly 
embarrassing disclosures. So, these highly embarrassing 
disclosures, Madam Chairwoman, did they arrive out of thin air? 
Were they presented to us by a demigod? No. These disclosures 
arose because of the work of our Chair, Maxine Waters, the 
Chair of the subcommittee, Al Green, and the Democratic staff. 
And had we continued the hear-no-evil, see-no-evil approach 
that this committee had the prior Congress, these embarrassing 
disclosures would never have come out, and these embarrassing 
board members would still be on your board.
    But we can't allow the outrages of the past to blind us to 
the crisis of the present. We have a coronavirus. People are 
afraid. The economic system could get better, or it could get 
worse. Not only do we have a coronavirus, we have a sudden 
decline in oil prices that is shaking up the markets, and the 
fact that we have two problems doesn't immunize us from a third 
or a fourth thing happening. In fact, your bank has done stress 
tests to look at other things that could hit our economy.
    You have a plan that was put in place 6 or 7 months ago, to 
send $31.4 billion out of your capital and to your 
shareholders. You don't know, and I don't know, what this 
coronavirus is going to do with the world economy. You may not 
be too-big-to-manage. You may be, but you are certainly too-
big-to-fail.
    Mr. Scharf, can you commit to this committee that you will 
suspend dividends and stock buybacks until we know what this 
coronavirus is going to do to the world's economy and to the 
solvency of your bank?
    Mr. Scharf. Congressman, we do a stress test, as you are 
aware, which puts all of the bank's--
    Mr. Sherman. I am aware of that, but that stress test was 
for some other stress happening, which could happen, and you 
have two stresses already. So you have done a stress test, but 
you haven't done a stress test where the other calamity occurs 
in the middle of a coronavirus that is infecting the entire 
world. So, we already have the stress. You haven't done a 
double stress test.
    You are too-big-to-fail. You have injured the economy by 
the practices that we are here to discuss in this committee. Do 
you want to do something good for the country and commit to 
ending stock buybacks and dividends until we know what the 
coronavirus is going to do to your bank's solvency?
    Mr. Scharf. Congressman, we are committed to--
    Mr. Sherman. Yes or no? I have limited time. Yes or no?
    Mr. Scharf. Congressman, we are going to run the bank the 
way we think is prudent with our regulators.
    Mr. Sherman. In other words, having dealt harshly with 
consumers in the past, you are going to do nothing to insulate 
our economy and our society from the possible meltdown of the 
bank.
    You ripped off consumers. Carolyn Maloney has her Overdraft 
Protection Act, which would protect consumers. You have 
substantial lobbying power, brilliant lobbyists who have 
represented you. Will you commit that they will be lobbying, 
starting tomorrow, for Carolyn Maloney's Overdraft Protection 
Act? Do you want to be on the right side of history? And this 
is not a trick question. I asked your predecessor's predecessor 
this exact question, almost a year ago today, and we told your 
people this was coming.
    Mr. Scharf. Congressman, we announced two new accounts 
recently, one that has no overdraft protection--
    Mr. Sherman. I didn't ask that. You are repeating exactly 
what your resigned predecessor said. Will you commit the 
lobbying power of your bank to work for the Overdraft 
Protection Act? Yes or no?
    Mr. Scharf. Congressman, I will commit that we will support 
the types of accounts that we just announced.
    Mr. Sherman. But that does not mean that you will work for 
legislation pending design to protect consumers from 
unreasonable overdraft protection or the phony ordering of the 
checks that clear on a particular day to disadvantage the 
consumer.
    Finally, will you enforce the arbitration provisions in 
your contracts, even as to the phony accounts where the 
consumer never signed for that account?
    Mr. Scharf. Congressman, we were able to settle our sales 
practice matter--
    Mr. Sherman. Settled, mostly. What about the ones that are 
still pending?
    Mr. Scharf. Where there is arbitration, we will continue to 
pursue it, but it is something that we certainly will continue 
to look at.
    Mr. Sherman. But you will bar people from Corda. Thank you.
    Chairwoman Waters. The gentleman from Missouri, Mr. 
Luetkemeyer, is recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. I think I 
want to spend some time with regards to the interim report that 
the Republicans have put together and try and go back and get 
some give-and-take and back-and-forth on this, Mr. Scharf. You 
know, this is the third report that we have done, our side has 
done since 2016, and in fact, half of the documents in here 
were obtained by Republicans now, as a result of the fact that 
the Obama Administration wouldn't turn them over. Now that the 
Trump Administration is in charge, we actually can get 
documents from the CFPB and the other regulators that actually 
have a better picture of what is going on here.
    One of the things that kind of concerns me is that as a 
former regulator--this is the first of three more hearings, and 
we have already had several prior to this on Wells, and yet we 
have not had a single hearing on the regulators who were asleep 
at the switch during this whole episode.
    In fact, in our report it says that in December 2013, the 
Los Angeles Times reported that the employees failed to meet 
their quotas and were going through all this sort of stuff, and 
that the CFPB supervisory staff was embedded in early 2014, and 
yet Wells Fargo had to notify the CFPB that the Los Angeles 
County city attorney was going to file a civil suit on the 
company's sales practices. And this was on May the 4th, and 
then finally on May the 8th, 6 months after the fact, the CFPB 
came rolling in on their white horse to save the day.
    Director Cordray was asleep at the wheel again, and it is 
very unfortunate because this is a situation--when your 
predecessor, Mr. Stumpf, was in front of us, I asked the 
question, because as a former regulator, I am aware that the 
regulators live in your bank.
    I asked him the question, how many regulators are in your 
bank today, and at that point he told me 75 were there full 
time. Do you know off the top of your head how many regulators 
are in your bank full time today, sir?
    Mr. Scharf. No, I don't. But it is significant.
    Mr. Luetkemeyer. Yes. Would you say more than that or less 
than that, just as a--
    Mr. Scharf. I would guess more. But we can certainly get 
back to you on that.
    Mr. Luetkemeyer. Okay. Thank you.
    Well, it is very frustrating to see that the CFPB had 
regulators sitting in your facilities knowing this practice was 
going on, were told about it by the--the Los Angeles Times 
broke a story and, yet, 6 months later, they finally took 
action. Because of that, the situation continued to grow and 
went out of control, and now we are, after the fact, trying to 
find a way to stop the nonsense.
    One of the other questions I asked of your predecessor, Mr. 
Stumpf, when he was here, because at that time there was a 
situation where, even according to our own report here it 
verifies that there were a thousand people a year, roughly, for 
5 years, who were being fired for their actions and their 
involvement in this sales scheme situation.
    And I asked him at the time--I said, I recall there was a 
third year that this had happened, and I asked him, what is 
wrong with your culture in that here we have a situation where 
you fired people. Not a thousand people the first year.
    Okay, I understand you recognize your problem. The second 
year, another thousand. I said, you are not fixing your 
culture. You are still firing people. Your culture is not 
fixed. How are you going to fix it?
    So, finally, we have a new individual take over and now we 
have you in his place. So I guess my question is, how are you 
going to change the culture that your predecessors never 
addressed, quite frankly?
    What are you doing differently? How do you see yourself, 
going forward, with your teams of people?
    Mr. Scharf. I think, certainly, we have to be clear on how 
a series of things come together to form a culture and then we 
as a senior leadership team need to make sure that we are 
behaving that way.
    That includes changing compensation, the way we evaluate 
people, the things that we look at to include risk and customer 
experience as part of that evaluation. Any time that we see any 
harm, we have to be the ones to deal with it as quickly as we 
can.
    If there is wrongdoing inside the company, don't just look 
at an individual and say that they did something wrong. Ask the 
question, do we have something in our structure that is wrong? 
And I think all of those things come together with 
accountability probably being the most important thing.
    Mr. Luetkemeyer. I just want to follow up, in my remaining 
seconds here, on something my colleague from Kentucky, Mr. 
Barr, talked about, and that is basically allowing the 
government to come in and change your business model.
    I am very concerned about the attempts, especially on the 
other side of the aisle, to intimidate you and your board into 
changing your business model by doing or not doing business 
with certain industries.
    To me, these are decisions that your board, and you, as a 
leader of that company, need to make. Don't allow the 
socialization of your business model by the government to take 
control of it.
    With that, I yield back the balance of my time.
    Chairwoman Waters. Thank you. It is not intimidation. It is 
called standing up for the consumers of this country.
    Mr. Luetkemeyer. Madam Chairwoman, would you like to 
discuss this? I would be happy to discuss this from at least 
the standpoint that Operation Choke Point was the very same 
thing that we are talking about here today. If you want to deny 
that, you can. But that is the truth.
    Chairwoman Waters. The committee will come to order.
    The gentleman from New York, Mr. Meeks, who is also the 
Chair of our Subcommittee on Consumer Protection and Financial 
Institutions, is recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman.
    First, I want to thank the chairwoman, Maxine Waters, and 
the chairman of the Oversight Subcommittee, Mr. Green, for 
doing the work and the research that revealed a continuing 
pattern that has taken place at Wells Fargo over this period of 
time.
    And I think that, to Mr. Scharf, this is something that 
should be an opportunity, because if you look at the 
investigatory work that took place, admittedly most of it or 
all of it before your 4 months, it should give you further 
ideas of what needs to be done to fix Wells Fargo, to move 
forward. So I think that it would be an opportunity for you to 
look at it and to take it very seriously.
    For me, coming in, anybody who was on the board or had 
anything to do--the way that you first show that you want to 
clean things up is you clean everybody out, because anybody who 
is there, who was part of the decision-making process while 
these procedures were going on, does not have clean hands. They 
are dirty hands. And then continues to be there. So the only 
way you fix an organization in that regard, as far as I am 
concerned, is you clean house.
    Now I will, in full disclosure, let you know that I have 
had the ability and the time to work with you in your previous 
capacity at Bank of New York Mellon.
    For the life of me, I don't know why you took this job, 
because anybody who is there has to be held accountable and 
look to see what are you going to do to improve all of the 
horrendous--and I have taken Mr. Sloan and others to task in a 
very, very strict way and I do intend on taking, whether they 
resigned or not, these members of the board of directors who 
were there, who were a part of the policies--I am going to 
really take them to task tomorrow.
    But I do think that you should take this report very 
seriously and to heart, and make the changes that are 
necessary.
    Now, I have been talking to you about some issues that have 
been very important to me and the subcommittee which I sit on, 
two issues. One is with Minority Depository Institutions (MDIs) 
and there have been a series of hearings because MDIs, in my 
estimation, can come in to communities where maybe the big 
banks shouldn't be because they don't want to be there.
    But as far as giving out mortgages and then making sure 
that they are able to provide services to communities or local 
communities where banking deserts are now appearing, we have 
been trying to make sure in these communities where they are 
underbanked and underserved, that financial institutions get 
capital from some of the big banks, and we have had that 
discussion. I know you told me that you were going to go and 
discuss it and come back.
    So my first question to you is, have you had that 
discussion, and what, if anything, is Wells Fargo looking to 
do? Because I want all the big banks, because I am going to be 
asking every one of them, to figure out how we can put capital 
into some of these small community MDIs.
    Mr. Scharf. Congressman, we are going to do something about 
it, and I completely agree about the importance of the Minority 
Depository Institutions. And as you said, they reach 
neighborhoods that we can't necessarily reach and we have been 
focused historically on connections expertise. But it is more 
about capital, as we have learned.
    So we are going to commit to invest up to $50 million of 
capital directly into these institutions as either Tier 1 or 
total regulatory capital, still keep them at a position where 
they are still minority-owned but provide the opportunity for 
those institutions--
    Mr. Meeks. I don't want to cut you off, but I am just sort 
of down on time, and I want to go through that with you on a 
continuous basis, because we have been talking about how we 
don't want the big banks to just give money to small churches; 
we want big major investments. So, I want to have a further 
dialogue and conversation with you in regards to that.
    The other piece is--I only have 20 seconds--I want to know 
about the CRA modernization where Comptroller Otting said he is 
discounting 75 percent on CRA credit for mortgage loans that 
are sold off.
    To me, that is going to stop people from giving out 
mortgages. It doesn't encourage it. But I would like to get an 
answer from you in writing later as to whether or not you think 
that is the appropriate thing and the way that the Comptroller 
is looking to do with CRA modernization.
    Thank you.
    Chairwoman Waters. Thank you.
    The gentleman from Michigan, Mr. Huizenga, is recognized 
for 5 minutes.
    Mr. Huizenga. Thank you, Madam Chairwoman, and I guess let 
me start out with a tone of unity, and I will agree with my 
colleague and friend from New York, Mr. Meeks, when he said, 
``I am not sure why you would take this job.''
    I would agree. In all seriousness, this is a significant 
undertaking. I am glad you are doing it, however, because we 
know that the United States, to remain competitive on the world 
stage, needs to have financial institutions than can handle 
these large international and national accounts and those kinds 
of things. But there are problems in the past.
    So, Mr. Scharf, I am interested in what changes to the 
consent order plan-writing process have you made since you have 
taken over as CEO? It is my understanding that none of the 
consent orders have received a non-objection. I think that is 
what the regulators specifically call it instead of approval.
    They have objected to each of the consent orders, is my 
understanding, even those issued in 2016. So, I am curious. 
Walk me through that process of how you are dealing with that 
now and maybe an update on that.
    Mr. Scharf. Congressman, we have changed our entire 
management approach to the consent orders. First of all, I 
personally am deeply involved in all of our Comptroller-related 
work, including all of the consent orders.
    Our new chief operating officer that we brought in from the 
outside, who has experience in dealing with issues like this at 
another bank that was going through a series of issues, is on 
board now and those responsibilities sit directly under him.
    He is probably spending 90 percent of his time on these 
issues. Under him, there is a group of people dedicated to 
managing each of these individual consent orders alongside all 
of the people across the company to ensure that the work is 
getting done appropriately.
    Mr. Huizenga. Can you identify what the biggest barriers 
are to achieving those acceptable submissions under the consent 
orders? Or what you believe the regulators may not have 
identified?
    Mr. Scharf. I think the biggest issue for us is just making 
sure that everyone across the company, including those on the 
front lines, understand that risk management, especially 
operational risk management, is everyone's job, and we need to 
educate them on what that means and how that fits into a 
seamless structure inside the company with the independence at 
the second line.
    Mr. Huizenga. Has that been really the barrier for you to 
receive those non-objections from the regulators or is there 
more to it?
    Mr. Scharf. I can't speak to what happened before, 
although, based upon the actions that I have taken, I think, as 
I said, there is a different sense of urgency.
    There is a different focus. We have different people with 
different disciplines with different review processes in place. 
So, we are fundamentally managing these differently. We have 
made clear that these are the priorities of the company above 
all else.
    Mr. Huizenga. And you are updating those consent orders or 
working with the regulators to get those in order?
    Mr. Scharf. We regularly talk to our regulators about them, 
yes.
    Mr. Huizenga. Okay. Let me move on a little bit. You had 
touched on sort of everybody on the front lines needs to know 
what the new culture is.
    Could you describe how sales employees are incentivized and 
does the company still use sales goals and those kinds of 
things?
    Mr. Scharf. We have changed all of the practices that led 
to the bad sales behavior, including those sales goals that led 
to that bad behavior.
    Today, our front-line bankers are paid based upon a series 
of criteria, none of which are sales goals. It is things such 
as customer experience. It is balances in the overall account 
and things like that. So, we do not have goals like that in 
place.
    Mr. Huizenga. How do you measure the customer satisfaction?
    Mr. Scharf. Historically, we have used a third party to 
provide those where they come in and do mystery shopping in the 
branches and then provide the feedback directly to the branch.
    Going forward, we are going to be moving towards a net 
promoter score where we actually do direct surveys of our own 
clients and get their--
    Mr. Huizenga. I have about 45 seconds and I want to hit a 
couple of quick things. Could you talk about the board makeup? 
That was one of the questions from my colleague from New York, 
about cleaning house. What does cleaning house on your board 
look like so far?
    Mr. Scharf. I don't have the numbers in front of me but I 
believe something like 70 percent of the board is new to the 
board since 2017. But I can get that for you.
    Mr. Huizenga. What I heard was 14 out of the 16, but if you 
could confirm that, it would be helpful. I see people behind 
you taking notes. That is good.
    And then at the end of the day, can you describe what 
cultural change really fundamentally needs to happen there?
    Mr. Scharf. Absolutely.
    Mr. Huizenga. Well, my time has expired. But I wanted to 
know what fundamental cultural changes you felt are necessary, 
and maybe we can follow up in writing, unless the Chair is 
willing to give you 30 seconds.
    Chairwoman Waters. The gentleman's time has expired.
    The gentleman from Missouri, Mr. Clay, who is also the 
Chair of our Subcommittee on Housing, Community Development, 
and Insurance, is recognized for 5 minutes.
    Mr. Clay. Thank you, Madam Chairwoman, and thank you for 
your testimony today, Mr. Scharf.
    Recently, the Student Borrower Protection Center (SBPC), an 
organization founded by former CFPB Student Loan Ombudsman Seth 
Frotman, released a report called, ``Educational Redlining.'' 
The report found that borrowers taking out private student 
loans to attend community college may pay more than similarly-
situated borrowers seeking loans to attend a 4-year 
institution.
    SBPC applied for student loan products with Wells Fargo, 
and found that Wells will charge a student applying for a 
$10,000 loan to attend a community college $1,134 more than a 
similarly-situated borrower seeking the same loan to attend a 
4-year college. Do you think that is fair?
    Mr. Scharf. Congressman, there is no room for 
discrimination in any of our lending businesses.
    Mr. Clay. Do you intend on changing the culture?
    Mr. Scharf. Congressman, I will go back and look at the 
specifics around this, because I am not aware of it. But if we 
had done something wrong, we will go back and make it right, 
and we will make sure that nothing like this is happening, 
going forward, anywhere.
    Mr. Clay. And also, under your consent decrees, you have a 
policy that steers people who would otherwise qualify for prime 
mortgages into subprime mortgages and, apparently, that is part 
of one of the consent orders. Are you aware of that?
    Mr. Scharf. No, I am not, Congressman. But we will 
certainly go back and look at it.
    Mr. Clay. And then, how would you make those people whole, 
who applied through your bank and were then steered into 
higher-cost loans? What can you do to correct that?
    Mr. Scharf. Congressman, if we have done something wrong, 
then it is our obligation to take the appropriate remediation, 
and specifically that is something that I have to look at to 
understand what the right thing to do is. So, I can get back to 
you on that .
    Mr. Clay. Okay. Would you assist or help those borrowers by 
reimbursing them or resetting the loans at a more reasonable 
interest rate?
    Mr. Scharf. Congressman, of course, we would look at all of 
the circumstances around it and figure out what the right thing 
to do is for those customers.
    Mr. Clay. Yes, and I think your customers as well as most 
of us on this committee are looking for fairness for the people 
who come to your bank looking for help. Do you agree?
    Mr. Scharf. I completely agree. If we have harmed people or 
if we have not treated people properly, we should take the 
appropriate remediation.
    Mr. Clay. Getting into another area, do you know Wells 
Fargo's lending volume in the State of Missouri and in southern 
Illinois, a region that I represent? Do you know the volume for 
minority- and women-owned businesses?
    Mr. Scharf. No, I am sorry, Congressman. I don't.
    Mr. Clay. Well, could you get me that information and share 
it with the committee?
    Mr. Scharf. We will certainly get back to you on that, yes.
    Mr. Clay. And what kind of incentive programs are in place 
for Wells Fargo employees in your retail and private banking, 
and are the programs linked to pay for bonuses? I am talking 
about an incident that I recently read about with your bank.
    Mr. Scharf. I'm sorry. I don't understand the question.
    Mr. Clay. Well, the typical retail branch employees at 
Wells tends to be on the lower end of the pay scale compared 
with corporate and investment banking. But you do incentivize 
them for bringing in high-dollar customers.
    Mr. Scharf. I'm sorry. Yes, Congressman, we have actually 
changed the compensation plans of the people in our branches--
our bankers--so that they are no longer paid on sales goals or 
anything like that. They are paid on customer experience and 
balance growth as well as some other factors that I don't 
recall right now. But it is nothing related to sales goals.
    Mr. Clay. How do we better address the culture of the bank 
so that you treat all customers with some respect and dignity?
    Mr. Scharf. Well, we are moving our--the customer 
experience goal--method of rewarding people to based upon what 
customer feedback directly is.
    Mr. Clay. I see. Thank you, and I yield back.
    Chairwoman Waters. The gentleman from Colorado, Mr. Tipton, 
is recognized for 5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman.
    Mr. Scharf, thank you for taking the time to be here.
    Just a little follow-up in terms of some of the sales 
goals. A lot of the reason that Mr. Sloan was here and now you 
are here was from the sales goals and some of the initiatives 
that were put in place with the false accounts that were open.
    Can you maybe expand on that a little more so I can 
understand how customer experience and expanding some of those 
balances, how that is going to be rewarded and how to be able 
to offset any further abuse?
    Mr. Scharf. Yes, Congressman.
    We have changed the entire compensation plan. But even 
beyond the compensation plan, we have changed the management 
structure and the reporting so that anything related to those 
sales goals, what drove that kind of behavior, and the 
management processes that went along with it are no longer 
there.
    So the people who work in our branches, regardless of 
level, have a series of things that they use to judge their 
performance, the most important, which I think if you were to 
go around and ask the folks in our branch they would say it is 
customer experience, and today it is mystery shops that take 
place inside the branch.
    We are going to be moving towards direct customer feedback, 
which will be a part of that, because we do believe that if the 
customer is not happy inside of our institution, then that is, 
obviously, very bad for us.
    Mr. Tipton. And are you pretty confident that you have a 
reporting structure through the chain of command to make sure 
that is going to be implemented properly?
    Mr. Scharf. Yes, I am, Congressman.
    Mr. Tipton. Okay. Great.
    On your first earnings call, you had mentioned that you 
would be introducing a new set of disciplines on how the 
overall company is going to be run.
    Could you outline what that new set of disciplines might 
look like and how they are different from the previous occupant 
in your seat?
    Mr. Scharf. Yes, Congressman.
    We now have an operating committee that meets regularly 
every single week for 2 hours. We meet once a month for a full 
month. Everyone is expected to talk about what is going on in 
their businesses, how they are doing with any of the control 
issues that we are aware of or if there is anything new that we 
should be aware of.
    The CFO and I hold monthly business reviews that were not 
held in the past where we meet with every business along with 
their senior folks and we review their financial results, their 
risk controls, progress they are making on people including the 
diversity component of that on a going-forward basis.
    Added to that is a fulsome budget process which is far more 
robust than anything that we have had in the past, which 
becomes a mechanism for us to proactively discuss things and 
make decisions that prior to that, were made in the individual 
businesses.
    Mr. Tipton. Thank you for that. I come from a rural area 
and we had a lot of conversation in this committee in regards 
to urban impacts that are going on. Could you maybe highlight 
for us the importance of--Wells Fargo, I think, has a number of 
branches in my district, in rural communities. Does that play a 
pretty important role in regards to CRA in terms of credit 
access for small businesses?
    Mr. Scharf. I think it is extremely important. I think it 
is not just important for numbers but it does go--when we think 
about some of the things that Wells has done well and not done 
well, helping in underserved communities is something which has 
been a core of the company.
    So the branches that we have in the communities where we 
have been for a long time are very important to us. The 
investments that we do in affordable housing, the lending that 
we do in low- to moderate-income (LMI) neighborhoods is 
something which is core to who the company is and, certainly, 
will be going forward.
    Mr. Tipton. And we would like to be able to give you the 
opportunity--you had a question earlier on some of the stress 
tests and whether or not in regards to the coronavirus and 
other challenges that may come up, known or unknown, to our 
financial institutions in terms to be able to maybe expand a 
little bit on whether or not you feel you are well-capitalized 
and able to take that into consideration.
    Mr. Scharf. Right. The point that I was going to make is 
that when you look at the stress tests that we went through, I 
believe it takes unemployment going to something like 10 
percent, GDP going down 8 percent, real estate values dropping 
by a quarter, commercial real estate values dropping by a 
third--very, very significant.
    And so as part of the Comprehensive Capital Analysis and 
Review (CCAR) process, we have to be able to continue to 
maintain the ratios that were required in that event with the 
suggested capital actions. And then as an institution, we do 
our own stress scenarios, which lead us to make decisions in 
terms of how we want to run the company.
    We have always done that prudently, again, with all of the 
issues that Wells has done. We have been very well-capitalized 
and we will continue to be well-capitalized.
    Mr. Tipton. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Georgia, Mr. Scott, 
is recognized for 5 minutes.
    Mr. Scott. Thank you, Madam Chairwoman.
    Mr. Scharf, how are you?
    Mr. Scharf. Fine, thank you, Congressman.
    Mr. Scott. Our banking system is the heart and the soul of 
our financial system, and this hearing this morning, at its 
core, is about trust. It is about consumer trust. It is about 
Wells Fargo customers' trust. And what I want to ask you is 
this: Can the consumers, can the people in this country, trust 
Wells Fargo now?
    Mr. Scharf. People can trust Wells Fargo to do the right 
thing, yes.
    Mr. Scott. Then, why is it that you have had consent orders 
from the Office of the Comptroller of the Currency, you have 
had consent orders from the Consumer Financial Protection 
Bureau, and you have even had consent orders from the Federal 
Reserve.
    And to my information, you have not adequately answered 
those. Am I correct?
    Mr. Scharf. You are correct.
    Mr. Scott. And may I ask you to explain why you have not 
responded?
    Mr. Scharf. Congressman, I joined the company 4 months ago. 
I am not in a position to explain what was done right and what 
was done wrong because I wasn't there. But I can tell you of 
the changes that we are making, which I think are different 
than existed prior to my arrival.
    Mr. Scott. It is important for you to really understand 
that you have a myriad of customers out there, one of whom is 
me. I am a customer of your bank and have had great experiences 
with it.
    You have been a leader in my community with helping to get 
some of the hardest hit funding to help folks out there who are 
suffering from their mortgages. This committee worked hard to 
get that done. We all didn't agree and didn't vote for the 
first bailout.
    President Obama got a little peeved with many of us. But we 
said, ``Mr. President, we love you. We want you to do good. But 
you can't just throw all this money up to the banks and not do 
something about the struggling homeowners who were the 
victims.''
    And he said, ``Go back and do something about it.'' We did, 
and we came up with about $2.8 billion, and we called the 
hardest hit--in Georgia, it is called HomeSafe.
    So there are some good things that you all have done. But 
my issue with you is that you are on this in a new position. 
But it is important. Once you get in a bad situation, in order 
to get out of that bad situation into a new situation, you have 
to know how you got into the bad situation in the first place.
    So for you not to respond to these consent orders is 
unacceptable, and I just want to urge you to do so.
    Now, I think that will be a good idea because to have your 
new chief accountability officer--I think you appointed one 
recently, didn't you? Wells Fargo, according to media reports, 
created a new role of chief accountability officer for the 
branch banking business. Are you aware of that? I would think 
you are, being the chief executive officer.
    Mr. Scharf. Yes, I am, Congressman.
    Mr. Scott. Okay. Why is it that you can't assign him to 
respond to this? See, if you don't respond to these consent 
orders that are being asked of you by the banking regulators, 
then that trust factor that I mentioned at the very beginning 
gets weakened.
    Will you move to respond to those consent orders after this 
hearing?
    Mr. Scharf. Congressman, all of my energy and my management 
team's energy is, again, responding to them in a way that is 
acceptable to them, yes.
    Mr. Scott. Okay. Thank you.
    Chairwoman Waters. The gentleman from Texas, Mr. Williams, 
is recognized for 5 minutes.
    Mr. Williams. Thank you, Madam Chairwoman.
    When John Stumpf came here before this committee in 2016, 
not long after the first Wells Fargo scandal broke, it seemed 
like the only answer he had to our questions was simply, ``I 
don't know.''
    I called on him to resign immediately for such lack of 
knowledge into his own company's practices. This was a slap in 
the face to all members of this committee but, more 
importantly, to the consumers that were taken advantage of 
because of his gross mismanagement.
    Mr. Stumpf's answers were simply unacceptable. Fast forward 
to 2019 when the next CEO, Tim Sloan, came before us to 
testify. I was somewhat optimistic that he would be able to fix 
the root causes of the issues that allowed so many scandals to 
occur.
    He made it seem like there was great progress in 
institutional changes being made to ensure that these actions 
would never be able to go unnoticed again. This might be even 
more offensive than his predecessor was--I don't know the 
answers--since he was not taking the company's transgressions 
seriously when such damage was done to customers.
    Now, all that being said, on a more positive note, I am 
glad to see Wells Fargo bring you in as an outsider of the 
company to try to fix the mess that has been surrounding the 
bank over the past few years. It will not be an easy process. 
You have talked about that, regaining this committee's or your 
customers' or the regulators' trust. But I hope that you will 
be able to get the bank moving back in the right direction.
    Mr. Scharf, I know that you have prior experience at BNY 
Mellon, JPMorgan, and many other financial institutions. So my 
first question would be, how do the management structures 
differ between Wells Fargo and other firms where you have 
worked? And can you go into detail about some changes you will 
institute at Wells Fargo, moving forward?
    Mr. Scharf. I think what we have today is more similar to 
what some of the other large well-managed institutions have 
versus what we had in the past. What we had in the past was--it 
was a federated model but there was not enough representation 
at the senior management table of all the different businesses. 
So, the discussions that were able to occur in terms of how the 
company was run, decisions that were getting made, the 
structure didn't encourage that to happen.
    Things today are very, very different than that. There is a 
clear understanding that we are going to run the company as 
one. We have business leaders in charge of the significant 
business that report directly to me, where we have the 
opportunity to question everything that goes on.
    There is an independent infrastructure around all of the 
risk and control work that needs to happen. People understand 
that is independent and the level of responsibility and 
accountability that they have.
    Now having said that, it is still early on, and so I do not 
think we are as well run as other firms yet. We have just 
implemented this. But everyone understands why it is better for 
the company and is supportive of it.
    Mr. Williams. I think the fact that you question is 
important. So, I am glad to hear that.
    The other side of the aisle has reiterated that they 
believe Wells Fargo is too big to manage and should be broken 
up. Now, I completely disagree, considering that other banks of 
similar sizes have been able to successfully cooperate when 
they have appropriate risk management structures in place.
    I asked this same question of Mr. Sloan, and I am curious 
to get your perspective on the issue. When former President 
Obama was questioned about breaking up big banks in a New York 
Times interview he said, ``One of the things that I have 
consistently tried to remind myself of during the course of my 
Presidency is that the economy is not an abstraction. It is not 
something that you can just redesign and break up and put back 
together again without consequences.''
    That is what President Obama said. Do you agree with the 
sentiment from the former President that breaking up the 
biggest banks is unrealistic?
    Mr. Scharf. I believe that the country benefits from the 
large banks and that they can be run properly and they should 
be run properly.
    Mr. Williams. Okay. Now, I am a Main Street guy. I have 
been a car dealer in Texas for 50 years, and I know how 
important access to capital is for the company looking to grow 
and expand operations, and how important risk and reward is.
    So one of my questions to you would be, are you a 
capitalist or a socialist?
    Mr. Scharf. I am a capitalist.
    Mr. Williams. Thank you. And since Wells Fargo is one of 
the largest small-business leaders in the country, I would like 
to know, quickly, what controls are in place to ensure that 
your small-business clients like me are being treated fairly 
and not subjected to abusive sales goals or incentive programs?
    Mr. Scharf. Our small-business franchise has the same 
controls over it today that the consumer franchises and our 
corporate franchises have. We have first-line risk management--
first-line meaning it is part of the business--which is far 
more robust than it was at the time of the sales practices 
problems, and we have an independent risk function, which is 
separate from them, which has an independent reporting line up 
to the Chair of the risk committee of our board.
    Mr. Williams. Okay. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Texas, Mr. Green, who 
is also the Chair of our Subcommittee on Oversight and 
Investigations, is recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman.
    Madam Chairwoman, please allow me to thank the persons who 
have worked so hard to pull this report together, the staff. 
They literally had to fight to get the many thousands of 
records that they have received. It was not easy, and the 
Republicans played no role in securing those records. They are 
simply playing catch-up and they are not doing a very good job.
    Mr. Scharf, we cannot allow the punishment for this level 
of fraud to simply become the cost of doing business. No one 
has gone to jail. It is true that the CEOs of the too-big-to-
fail banks have thus far been too-big-to-jail.
    We must do more than simply pay the government a fine. Most 
of the front-line workers in these banks live paycheck-to-
paycheck while the banks have made profits in excess of $150 
billion a year. A hundred and fifty billion dollars a year 
since the recession.
    In 2018, a bank CEO made 776 times the salary of a minimum 
wage worker. That CEO made approximately $24.2 million. I shall 
not mention his name, but I am prepared to, if I have to.
    I have visited with you. Thus far, you have been straight 
with me and I do believe that out of adversity, there is 
opportunity. The greater the adversity, the greater the 
opportunity.
    You now have an opportunity to help us change not only the 
culture at your bank but to change the culture across banking. 
Workers need a living wage. All workers in banks should have a 
living wage. Workers need stronger whistleblower protection.
    This is a part of the solution. Not nondisclosure 
agreements that silence workers. If we had had stronger 
whistleblower protections, I do believe someone would have 
reported this circumstance and we wouldn't be sitting here 
today.
    We need to improve your mentor-protege standing. Black 
banks are going out of business. We have approximately 18 or 19 
now, depending on who is counting and how you count.
    We need help. You are in a position to change this. You can 
change the course of destiny for Minority Depository 
Institutions (MDIs). The lowest-paid workers in banks are women 
and people of color. The highest-paid disproportionately, in 
both cases, are white men. White men are doing well. People of 
color and women are not doing as well. We can change this.
    These are the kinds of issues that we refuse to confront 
because there is a danger associated with it. There is a 
culture that has developed that will punish you if you try to 
develop equity and equality. It will silence you.
    You can speak with a very loud voice. You were not a part 
of the transgressions that took place but you can be a part, 
and I believe you really want to be a part, of a solution that 
can change not only the culture at Wells but the culture across 
banking.
    We need a bill of rights for the workers within the banks. 
We ought to have something that is posted, that is clear, 
concise, and conspicuous, unambiguous, that says to workers, 
you mean something not only to this institution but to this 
country. Here are your rights. You have the right to report 
without fear of being somehow punished for your doing the right 
thing.
    So I am going to ask that we meet again. Will you assure me 
that you will meet with me again, sir?
    Mr. Scharf. Absolutely, Congressman.
    Mr. Green. And will you assure me that you will work with 
me to develop this bill of rights for workers? Will you assure 
me, sir?
    Mr. Scharf. I will absolutely work on a bill of rights that 
makes sense in Wells Fargo.
    Mr. Green. I thank you, and I yield back the balance of my 
time.
    Chairwoman Waters. The gentleman from Georgia, Mr. 
Loudermilk, is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman.
    Mr. Scharf, thank you for being here. Thank you for the 
time that we have spent discussing your short time at Wells 
Fargo and your vision of how to correct these problems and move 
forward to make Wells Fargo an organization in compliance and 
focused upon its customers.
    Before I get into my questions, though, I would like to 
remind my colleagues of something I heard earlier, that the 
Republicans took a hear-no-evil, see-no-evil stance on this.
    I want to remind everyone that it was the Republicans in 
2016, the first year I was on this committee, who began the 
investigation into Wells Fargo, and we obtained several 
thousand pages of documents.
    And this report that was submitted today is not the first, 
it is not the second, but it is the third report that was 
issued that was based on those document and the thousands more 
that the Trump Administration has released voluntarily in the 
last year.
    So, this isn't something new. This isn't just something 
that has popped out of the woodwork. This is something that has 
been going on, that we have given our utmost attention to. And 
through all of that, it has been somewhat frustrating.
    I have been frustrated and concerned over the, 
specifically, lack of progress that we saw over that time, 
especially when it came to complying with the consent orders by 
the regulators.
    Now, from our meeting and from other information that I 
have received I am encouraged that the OCC has indicated that 
under your short tenure, the bank has made progress toward 
complying with these consent orders.
    With this large of a committee, and your short tenure--
everyone knows the past--you are going to get the same 
questions repeated over and over again so everybody can get 
their sound bites.
    So, some of mine may be questions that have been asked 
before, but I really want to kind of hone in on some of the 
details. Could you briefly describe specific actions you and 
your staff are taking from a risk management perspective to 
come into compliance with the 14 outstanding consent orders 
that the regulators have imposed?
    Mr. Scharf. For specifically the issues in risk management 
related to operational risk and compliance, we have 
significantly increased the staffing. But, more importantly 
than just the people is putting the right framework in place so 
that everyone across the company understands how we are going 
to run risk and understands what their role is in ensuring that 
risk management is done properly in the organization.
    That framework makes it clear what everyone within a 
business has to do with their level of responsibility is, how 
we are going to do that review work in the second line of 
defense independent of the business itself. That is the 
independent risk management function.
    And then, we have our third line which plays an extremely 
important role, internal audit, which takes a third independent 
look at everything that is done. All of that , and those levels 
of independence, are extraordinarily important.
    But, most importantly, the robustness of what we have in 
place--not just the people who exist but the processes and the 
documents that we are building create a very, very different 
control environment than existed historically at Wells.
    Mr. Loudermilk. Good. Thank you.
    And you have stated this before, but I would like to ask it 
again, and as Mr. Scott, my colleague from Georgia stated, I am 
also a Wells Fargo customer and I have always had a good 
customer experience.
    Under your leadership, is meeting regulators' expectations 
and requirements as well as the needs of the customers the top 
priority?
    Mr. Scharf. There is no question that that has to be the 
top priority. But I take it a step further inside the company, 
which is what I explain to people, that we are not doing this 
just because the regulators want it. We are doing it because it 
is the right way to run a company.
    So we need to do this because we believe it is right, and 
when we run the company that way, then the regulators will be 
fine with it.
    Mr. Loudermilk. Probably my final question, based on time, 
is you have talked about restructuring it from a more 
federalist type organization to a more streamlined centralized 
organization.
    How did that decentralized organization contribute to this 
problem and, thus, how does centralizing--how is that going to 
resolve it?
    Mr. Scharf. Congressman, that structure didn't have the 
appropriate checks and balances that we have today. Business 
leaders controlled their own staff functions. They controlled 
their own risk functions and everything else that went along 
with it.
    So, there wasn't a consistent set of policies. There wasn't 
a consistent set of application of policies and there wasn't 
the independent functions to come in and look and to say, we 
like and agree with what they are doing or we don't and 
therefore you need to change it. That is what we have today, 
and that overrules what individual businesses want.
    Mr. Loudermilk. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Missouri, Mr. 
Cleaver, who is also the Chair of our Subcommittee on National 
Security, International Development and Monetary Policy, is 
recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Yesterday, two of your board members resigned. Your two 
predecessors testified before this committee and, shortly 
thereafter, resigned. Here you are, less than 6 months on the 
job, and you are sitting in that chair. Why in the world would 
you take this job?
    Mr. Scharf. I appreciate the question, Congressman. You are 
the third person who has said that since we started. So, I am 
glad to be able to answer it.
    I genuinely believe that Wells Fargo is an important 
institution for this country. I really do, and just because the 
company has not been well run in the past, doesn't mean it 
can't be well run now.
    When I talk to customers of all sizes, from consumers to 
small businesses to middle-market companies, when I look at 
some of the things we have done in communities, when I talk to 
our own people--I was in a branch yesterday and we asked 
someone why she came to work every day, and I swear to God, she 
said, ``Because I love this company. I love the opportunity 
that they have given me.'' And that, clearly, wasn't the entire 
culture of Wells Fargo, but it is an important part of what the 
culture is.
    And so in the context of doing what is right for our 
employees, doing what is right for all the people we do 
business with in their communities, I believe that if we run 
the company properly, we have the opportunity to benefit more 
than if we didn't do this well.
    Mr. Cleaver. Thank you.
    For you to walk in there, you have to have something that 
most folks don't. But let me turn to an extremely difficult 
part of this hearing for me. I have the Minority report from 
Senator Sherrod Brown, from March 2020, which I would like to 
enter into the record, Madam Chairwoman.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Cleaver. Here is what is troublesome. It is about one 
of the log posts of one of the employees who said, ``Hate 
crimes hoaxes are about 3 times as prevalent as actual hate 
crimes, and I hate that I actually dignify their existence by 
quoting a statistic that recognizes them.''
    And then, ``Fine. Let us say that they called him the `N' 
word. Would that make them racist or just ------ holes, looking 
for the most convenient way to get under his skin?'' This is a 
guy who worked at the CFPB, in an appointed position at the 
CFPB, which, for somebody like me, with my skin color, that is 
insulting and also disheartening.
    I am using this because there is a report that suggests 
that there is a back channel of communication between Wells 
Fargo and the CFPB. Is there this back channel, and is it still 
in existence today, to your knowledge?
    Mr. Scharf. I am not aware of a back channel of 
communication, no.
    Mr. Cleaver. So, that is the first time you heard about 
this alleged back channel communication going on?
    Mr. Scharf. I read the report, Congressman. All of the 
conversations that we have with the CFPB, to my knowledge, are 
open, on-the-record conversations directly with the regulator 
that everyone is supposed to be aware of who should be aware of 
it.
    Mr. Cleaver. Okay. That is the answer that I am looking 
for, because the person who made these statements is no longer 
there. But I am very concerned, very much concerned.
    I was here when we--I guess the chairwoman and I are maybe 
the only two Members who were here when the CFPB was created, 
and whether the people who were not here choose to accept it or 
not, there were great, great pains taken to make sure that the 
CFPB was not politicized, all the way down to keeping Congress 
from getting involved in the funding of that department.
    You have already read the report. But I would advise 
everybody to read this report. It is chilling when they start 
quoting some of the people who were actually at the CFPB making 
decisions.
    Madam Chairwoman, I yield back the balance of my time.
    Chairwoman Waters. Thank you.
    The gentleman from Ohio, Mr. Davidson, is recognized for 5 
minutes.
    Mr. Davidson. I thank the chairwoman.
    Mr. Scharf, thanks for being here. It has been a long 
tradition, an unfortunate tradition, for the CEO of Wells Fargo 
to spend a disproportionate amount of time here in the nation's 
capital, and, frankly, the Federal Government spends a lot of 
energy running all sorts of businesses that they probably have 
no business running.
    But Wells Fargo kind of proves that even with all sorts of 
regulations, all sorts of oversight, layer upon layer of 
redundancy, it feeds this narrative that we just need more 
regulation.
    And in spite of all the regulation, in spite of all the 
Dodd-Frank reforms and the State regulators and the Federal 
regulators and the OCC and the FDIC and the Federal Reserve and 
all kinds of laws that make it illegal to do the things that 
Wells Fargo's employees did, these bad things happened anyway.
    There are human beings in all sorts of other companies, but 
we don't believe these bad things have happened on the scale 
that these bad things have happened at Wells Fargo. So what 
makes Wells Fargo so special? Now that you have been there, why 
could all this happen at Wells Fargo?
    Mr. Scharf. Congressman, I think your point is very fair. 
We did not have the appropriate controls in place. We didn't 
have the appropriate culture. We didn't have the right people 
in these jobs.
    Mr. Davidson. So, the humans there just needed the other 
controls that other places had? What drove these people to do 
it? Was it just passive, you didn't have the controls there, or 
was there an affirmative push to do bad things?
    Mr. Scharf. No, I think, certainly, the controls should 
have caught it after the fact, but the initial problem was that 
the structure of the company was decentralized. The culture 
promoted these types of activities and the culture was not one 
of accountability.
    Mr. Davidson. So for that reason, there has been a lot of 
culpability, at least financially, for Wells Fargo. How many 
fines in total has Wells Fargo paid as a consequence of these 
bad actions?
    Mr. Scharf. Congressman, I don't have that number right 
here.
    Mr. Davidson. Is it a couple hundred bucks like a speeding 
ticket? Is it a couple hundred million bucks? Or is it a few 
billion?
    Mr. Scharf. It is billions.
    Mr. Davidson. Billions of dollars. And I think it is fair 
to say that if these culpabilities resulted in billions of 
dollars of fines, some people lost their jobs?
    Mr. Scharf. Congressman, yes, many people have lost their 
jobs.
    Mr. Davidson. At the very top? CEOs--you are now the third. 
Board members, bank managers, managers of departments, people 
who were supposed to manage risk. Lots of people have been held 
accountable in the sense that they lost jobs. Has anyone gone 
to jail?
    Mr. Scharf. Not that I am aware of.
    Mr. Davidson. Does any of this rise to the level of a 
crime?
    Mr. Scharf. Congressman, when we settled with the 
Department of Justice, we stated a series of facts, which 
included that individuals at the bank committed crimes.
    Mr. Davidson. So do you believe it is up to the Department 
of Justice to follow through and actually hold someone 
accountable?
    Mr. Scharf. Congressman, I think it is up to the Department 
of Justice to determine what they think is right and 
appropriate.
    Mr. Davidson. Well, all of America is looking for the 
Department of Justice to hold people accountable and, frankly, 
it is not just in banks.
    We are all wondering, when is somebody going to jail, 
because there has been all sorts of abuse of trust in our 
country and, frankly, the government has violated a lot of it 
themselves.
    You have taken some actions that are encouraging in a short 
time as CEO, and I think, when you look around by reputation, 
you come across as somebody who seems to have the potential to 
really come in and change a very, very large organization.
    One thing you created was a sales practice oversight 
management function. Could you describe what you envision for 
this new role and what policies you think need to be put in 
place at Wells Fargo to ensure employees are actually held 
accountable for their actions?
    Mr. Scharf. Yes, Congressman. Since our sales practice 
scandal, we have looked across the company at the different 
sales practices to ensure that we don't have the kind of 
behavior that existed in the company prior.
    One of the things that we wanted to ensure on a going-
forward basis was as we continue to evolve as a company that 
that continued. So to centralize the responsibilities of sales 
practice oversight in one place under our chief operating 
officer where they set the standards, they monitor what is 
necessary on a consistent basis across the company to ensure 
that even though something might not exist today, that we don't 
wake up and find out something exists in the future.
    Mr. Davidson. Thank you. I yield back.
    Chairwoman Waters. The committee will stand in recess for 5 
minutes.
    [recess]
    Chairwoman Waters. The committee will come to order. The 
gentleman from Illinois, Mr. Foster, is recognized for 5 
minutes.
    Mr. Foster. Thank you, Madam Chairwoman. Mr. Scharf, I echo 
the concerns of my colleagues on this committee about the 
extensive shortcomings of Wells Fargo over a number of years 
past, and I do hope that you are as committed and as successful 
in turning your ship around as you have stated in your 
testimony.
    Now, I would like to bring up the issue of dreamers. This 
is an issue that hits close to home. Last summer, Eduardo Pena, 
a dreamer, a DACA recipient from Illinois, filed suit because 
he was wrongly denied an auto loan by Wells Fargo because of 
his DACA status. I was glad to see some of the changes that 
Wells Fargo has decided to implement recently, including its 
plan to provide DACA recipients with access to credit products, 
including auto loans, education loans, and mortgages. I cannot 
emphasize enough how important this commitment is, and I hope 
that you work diligently to implement this new policy.
    But because a press release is one thing, at the end of the 
day a new policy that does not achieve results in the form of 
actual loans to actual DACA recipients can mean it has been a 
failure. So can we have your assurance that you will track 
progress on this issue and that you will periodically report 
back to us on progress on providing credit to dreamers?
    Mr. Scharf. We will absolutely track the progress and we 
can certainly talk to you about how we should report back to 
you.
    Mr. Foster. Thank you. I appreciate that. This is an 
important issue to my constituents.
    Now as you are no doubt aware, the bank's Community 
Reinvestment Act (CRA) exam ratings and findings are disclosed 
to the public, after, I believe, a delay of a couple of years. 
One measure that we are contemplating would be to require banks 
to disclose their consumer compliance rating and findings in 
the same way. Would you agree that this would be an effective 
method to limit consumer abuses?
    Mr. Scharf. Congressman, we certainly agree on 
accountability and ensuring that the regulators understand and 
have access to all of the information they need to draw those 
conclusions.
    Mr. Foster. No, I am referring to the public. The public 
also has a need to understand which banks deal properly with 
their consumers and which have a different record.
    Mr. Scharf. Congressman, respectfully, I think that is a 
decision, a discussion between you and the regulators.
    Mr. Foster. Okay. So you don't have an opinion on whether 
or not this might be a good idea, and so you would not be 
opposed to it?
    Mr. Scharf. Congressman, I don't--honestly, I think, given 
the condition that we are in and the work that we have to do, 
it is really not up to me to--that I am not the best person to 
give advice. I am focused on doing the work.
    Mr. Foster. Well, you are also in the process of repairing 
an organization where some of the incentives were wrong and 
some of the results were wrong. So, you must have an opinion on 
whether this sort of thing, a little bit of public visibility 
towards findings that have shown abuse of the consumer, might 
be an incentive that might have improved behavior in the past, 
and might improve behavior going forward?
    Mr. Scharf. Congressman, I just think, like any other 
issue, there are plusses and minuses on this, and I think that 
it is really appropriate for you and the regulators to talk 
about what those are and come to a decision.
    Mr. Foster. Okay. So, we will handle this without your 
input, I guess.
    The compensated incentives are really, to my mind, at the 
heart of getting corporate behavior right, and I was encouraged 
to hear that you have made some changes there. One of the 
pieces of legislation that is being considered in this hearing, 
H.R. 3885, does a number of things, one of which is to put the 
executive bonus pool in a first-loss position for any 
regulatory fines or penalties. And while I have lots of 
questions about the details and the mechanisms and the formulas 
involved in this piece of legislation, I was wondering if you 
have a reaction to how effective this might be in preventing 
future--in getting attention by top management towards consumer 
abuses?
    Mr. Scharf. Congressman, I think what we have to do, and 
what will drive accountability inside the organization, is to 
ensure that when we judge people, we make sure that there is 
accountability in what we pay people, and that is what we are 
doing today.
    Mr. Foster. Okay. So that is, I guess, my next question, 
which I will be giving you to answer in writing for the record, 
because there will be some detailed numbers.
    Could you answer, for the record, how the financial burden 
for regulatory fines--just go over the top 20 fines that 
happened over the last decade, and describe the economic pain 
for those fines was distributed among the shareholders and top 
executives and everyone else who might have absorbed the pain, 
both as they occurred in the last decade and how they would 
occur with the current system that you now have in place?
    Mr. Scharf. Congressman, I can tell you that the fines that 
we have incurred over the past year, when I was at the company, 
have impacted people's compensation directly.
    Mr. Foster. Right. So I would like to see a table of 
numbers and percentages, to see what fraction of the burden 
lands on the shareholders, what lands on top management, on 
line management, and so on, down there. And I think I am now 
out of time, so I yield back. We will be giving you a question 
for the record on that.
    Chairwoman Waters. The gentleman from Tennessee, Mr. 
Kustoff, is recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman. And thank you, 
Mr. Scharf, for appearing today. I have heard a number of 
people ask you today why you would take the job that you have 
taken, and I appreciate you stepping into that role.
    With that said, how would you characterize the reputation 
and the brand of Wells Fargo, today, as we sit here?
    Mr. Scharf. I think as we sit here today, we have not yet 
re-earned the trust that we would like the Wells Fargo name to 
represent.
    Mr. Kustoff. In your opinion, is the brand and the 
reputation of Wells Fargo irreparably damaged?
    Mr. Scharf. Congressman, I do think that the brand and 
reputation is extraordinarily important in this business and 
something that we have to work to earn, and we, in fact, can do 
that.
    Mr. Kustoff. You can restore it, or Wells Fargo can restore 
its brand and reputation?
    Mr. Scharf. Congressman, I absolutely believe that we can 
restore the brand and reputation of Wells Fargo by taking the 
kinds of actions that we have started to take in the short time 
I have been at the company.
    Mr. Kustoff. In my district, you have a number of retail 
institutions. You have a number of branches in my district. If 
the customer is an hourly wage employee, if it is a small 
businessperson, a professional, and they come in and they want 
to do business with Wells Fargo, in layman's terms, how would 
you instruct your bank officer, customer service 
representative, or whomever is trying to get that business or 
maintain the business, what would you tell your employee to 
relate to this hourly wage employee, to the small business 
owner, or somebody trying to take out a mortgage? Why should 
they want to do business with Wells Fargo?
    Mr. Scharf. Congressman, I think we should treat our 
customers and our employees the way we would want to be 
treated. And so to the extent that we are thinking about their 
needs and what is right for them, and how the things that we 
can do can be there to serve them, that is the way we want all 
of the people who work for Wells Fargo to be thinking about how 
to deal with their customers who walk in the door.
    If we are not doing that, I genuinely believe we are not 
going to be successful. We clearly haven't done that 
historically, at all times, and we have seen the results of 
that. And so, that is something which has to be built into the 
culture of the company, the compensation of the company, the 
management of the company, in a very different way than it has 
been in the past.
    Mr. Kustoff. Well, let me ask it in a different way. What 
would that bank officer tell that customer that they are trying 
to either maintain or obtain, what would they tell them about 
Wells Fargo and why they should want to do business with Wells 
Fargo, considering everything that customer or potential 
customer has seen and read about in the media?
    Mr. Scharf. Congressman, I think that we want our customers 
to know that we are committed to doing the right thing for 
them, and all the actions that were taken since I have been at 
the company are directed towards that. Ultimately, that is what 
is going to earn back the trust of the people who stand in 
judgment of us, and that is not just our customers. It is the 
communities we serve and regulators and shareholders and 
legislators.
    And so, if we are not doing the right thing for our 
customers every single day, then we are going to fall short of 
who we should be.
    Mr. Kustoff. Okay. Say, I am a bank customer and I am 
thinking about cutting off my relations with Wells Fargo 
because of everything that I have heard about, and I have read 
about, that has been going on for several years. Mr. Wells 
Fargo and Ms. Wells Fargo, why do I stay as your customer? In 
layman's terms, what would that person say to--
    Mr. Scharf. Well, the number one reason why they would stay 
is they love the people that they do business with, who work at 
Wells Fargo. The personal relationships that they have 
developed are extraordinary. I was in a branch yesterday in 
Washington, and we asked that very question, ``Why do your 
customers come in?'' And it is because of that personal 
connection, and then because they believe that what we do is 
great for them--our products, our services, our convenience, 
our technology, but ultimately it has to have this wrapper of, 
we are going to do what is right by them.
    Mr. Kustoff. Thank you, Mr. Scharf. My time is expiring. I 
yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Massachusetts, Ms. Pressley, is recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman, and Chairman 
Green, for your steadfast oversight. I also want to recognize 
the diligent and good work of this committee's Oversight and 
Investigations staff.
    In 2018, large banks posted record profits that were only 
topped by their profits in 2019. But a decade ago these same 
banks were rescued by trillions in bailout loans. It does seem 
that in the case of banking, your profits are private, while 
your losses are socialized. Over the years, you have helped 
lead CitiGroup, JPMorgan Chase, BNY Mellon, and now Wells 
Fargo, four of the nine recipients of the initial round of 
Troubled Asset Relief Progrqm (TARP) rescue funds.
    Mr. Scharf, this is your second time appearing before the 
committee in less than a year. Given that this report shows the 
limits of traditional confidential bank supervision in 
effectively curbing Wells Fargo's egregious behavior, do you 
agree that the public has a right to hear from you directly 
through annual testimony and reporting?
    Mr. Scharf. Congresswoman, when I took this job, I 
understood that this was part of what the job is. What the 
appropriate frequency is, I will leave it to you to make that 
determination.
    Ms. Pressley. It is a reasonable ask for other large, 
systemically important U.S. banks. Yes or no, just for the 
record?
    Mr. Scharf. Congresswoman, I am not the right person to ask 
that question. I am focused on Wells Fargo right now.
    Ms. Pressley. And so yes or no, do you agree that it is 
fair that you should come annually and report?
    Mr. Scharf. Congresswoman, I do believe that it is 
appropriate for me to come when asked to come by the committee.
    Ms. Pressley. Congress established your national charter, 
Congress created the deposit insurance your bank enjoys, 
Congress stood up the Federal Reserve to be a lender of last 
resort, and Congress developed the legal framework that governs 
your bank. So, an annual check-in not too much to ask, and that 
is exactly why, with the support of the AFL-CIO and the 
Communications Workers of America, I introduced the Greater 
Supervision in Banking Act, requiring annual public testimony 
of G-SIB CEOs, like yourself, and reporting about bank size, 
diversity, any regulatory enforcement or fines, and notably, 
the workforce's treatment at all levels.
    Your contract with Wells specifically states you will not 
be required to relocate, allowing you to work remotely. 
However, while at BNY Mellon, you pushed to restrict employees' 
ability to telecommute.
    So yes or no, just in the interest of time here, have you 
instituted similarly restrictive policies at Wells?
    Mr. Scharf. Congresswoman, first of all, I do not 
telecommute. That is a very important distinction. We are a 
national company that has people all across the country, 
including our operating committee, and I am in a location with 
a series of our operating committee members.
    Ms. Pressley. Mr. Scharf, I just want to get back to the 
employees here. Have you instituted any restrictive policies at 
Wells?
    Mr. Scharf. Congresswoman, I have not implemented any 
restrictive policies at Wells.
    Ms. Pressley. In the midst of this global pandemic, will 
you commit to allowing all employees who can perform their 
duties remotely to do so? Yes or no?
    Mr. Scharf. Yes.
    Ms. Pressley. Do you commit to providing all workers, down 
to custodial staff, call center employees, and third-party 
contractors with necessary sick days as well as paid leave? Yes 
or no?
    Mr. Scharf. I need to think about that whole list of 
people, but for our employees, we absolutely will do that.
    Ms. Pressley. All employees, down to custodial staff, 
third-party service workers, our most vulnerable workforce.
    Mr. Scharf. I did not say third-party workers. I said 
employees.
    Ms. Pressley. No, I did.
    Mr. Scharf. Right. I said employees, Congresswoman, and I 
said we certainly would be willing to look at the rest. It is 
not something I have thought of sitting here.
    Ms. Pressley. Okay. Well, I hope you will give it deep 
thought, because they do represent our most vulnerable 
workforce.
    I want to be clear. Being a nationally chartered bank and 
one of the largest at that is a privilege. It is not a right. 
It is a privilege that comes with accountability to this 
Congress, your employees, and the American public. When all 
Americans, not just those who are Wells customers, serve as a 
backstop to your bank, again, the least you can do is show up 
once a year to answer these questions thoughtfully.
    Thank you, and I yield back.
    Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman. And 
thank you, Mr. Scharf, for your testimony.
    When I read through the reports, I kind of bucket the 
issues in three places: (1) ops/compliance; (2) reporting; and 
(3) board of directors (BOD) issues. I want to kind of hit on 
each of these quickly.
    On the ops/compliance side, you have talked about how you 
have flattened the organization, and are no longer in the 
federated structure. Part of the federated structure was that 
risk management was embedded in the individual business units, 
I believe. Specifically, has that practice ended? Have we 
elevated risk management and sort of pulled it away to monitor 
more broadly?
    Mr. Scharf. Congressman, we have to have independent risk 
management, and we have completed that at the company, and we 
are continuing to build out all of the appropriate first-line 
functions as well as we work to make that second-line function 
as effective as it needs to be.
    Mr. Gonzalez of Ohio. And then another issue that was 
mentioned was this enterprise-wide risk management component. I 
realize that probably looks different at each bank. How are we 
progressing on that, specifically?
    Mr. Scharf. We are continuing to work to make sure that 
everyone in the company understands what their responsibility 
is. The only way we can have an effective risk management 
infrastructure across the company is that there is consistency 
of application, a consistent level of understanding and 
implementation. And that takes some time and that is working 
through.
    Mr. Gonzalez of Ohio. Great. And then on the reporting 
side, again it was clear that the board felt--the board had all 
kinds of faults, obviously, but they felt at times that they 
weren't getting the right information or that they were being 
misled. Obviously, they don't prepare reports. They consume 
reports, reports that management provides them.
    How confident are you that the reporting issues, the 
accuracy, the frequency, et cetera, have been taken care of 
going forward?
    Mr. Scharf. I certainly think, Congressman, that the 
quality of the reports we give them has continued to improve. I 
think that is an ongoing task that we have to make sure we are 
doing our very best at. Board members generally--it can be very 
often as good as the quality of the materials we give them. And 
so, that is an ongoing effort. That is underway, and we have to 
continue to improve it.
    Mr. Gonzalez of Ohio. Thank you. And then with respect to 
the board, I want to ask a general question, because we are 
going to have two former members of your board here tomorrow, 
and I think that sets a very interesting precedent that I hope 
doesn't become routine, where we are hauling in board members 
of companies. Your situation is unique, so I hope that this is, 
in fact, unique.
    What is the role of a board of directors in a public 
company?
    Mr. Scharf. The board's responsibility is to oversee 
management, to approve strategy, and certainly, in our case, to 
have confidence in the regulatory work that is ongoing.
    Mr. Gonzalez of Ohio. Not to run the bank.
    Mr. Scharf. Congressman, no. I believe the management team 
is tasked with running the bank, overseen by the board.
    Mr. Gonzalez of Ohio. Thank you. And then, how important is 
it for you to be able to have proprietary conversations with 
your board?
    Mr. Scharf. Congressman, I think it is extremely important. 
I personally believe that the best way to help the board 
members do their job and for the company to get what it can out 
of every single board member is to be as open and honest as you 
possibly can, think very, very early on about having 
conversations with them so they can be brought in very early, 
and doing that in a confidential way, I think is critical.
    Mr. Gonzalez of Ohio. Yes, and I think I am sort of caught 
in two minds here. I think if I were a shareholder of Wells, I 
would be happy with the outcome of new board members. As a 
Member of Congress, again, I worry that we are going to set a 
precedent where we haul board members in for any company that 
is not doing things exactly how we want. I think that sets a 
dangerous precedent. I don't know that we have done that. I 
think we did it with Enron a while back--again, a unique 
situation which feels appropriate.
    I want to switch to something else. Hopefully, we can get 
through it. Do you have any immediate plans to run for 
Congress?
    Mr. Scharf. No, I don't, Congressman.
    Mr. Gonzalez of Ohio. Good job. Do you seek to become a 
legislator at any point?
    Mr. Scharf. No, I don't, Congressman.
    Mr. Gonzalez of Ohio. Do you like running your bank? Do you 
like running banks?
    Mr. Scharf. Congressman, I am very proud and I do enjoy 
running the bank.
    Mr. Gonzalez of Ohio. So I am going to urge you to run your 
bank. Run your bank according to the laws of this country. We 
are the legislators. I don't want to run your bank. I don't 
think you want any of us running your bank. I don't think you 
want us telling you who to do business with, what to do, how to 
operate, all those sorts of things. You run the bank consistent 
with the consent orders and the laws of this country. We will 
create the laws. It is a beautiful system. If we start mucking 
it up by telling you who you can and can't do business with, I 
think we set a very terrible precedent once again.
    And with that, I yield back.
    Chairwoman Waters. The gentlewoman from Iowa, Mrs. Axne, is 
recognized for 5 minutes.
    Mrs. Axne. Thank you, Madam Chairwoman, and thank you, Mr. 
Scharf, for being here today. I appreciate it. My colleagues 
have already addressed most of my questions, and I know you are 
new to the bank, so I am not going to rehash most of the issues 
that Wells Fargo has had. From everything I have been hearing 
so far, and from talking with you individually as well, it 
sounds like things are improving, and I really hope that 
continues, because I think all of us here expect better than 
what we have seen from Wells Fargo and from your predecessors.
    My interest in Wells Fargo doing better, as you are 
probably aware, is very acute due to the fact that I have 
almost 15,000 Wells Fargo employees in my district, so thank 
you for that. We have a vested interest in making sure that 
Wells Fargo is a successful bank, to keep those jobs.
    Can you give me some assurances that fixing the previous 
problems will be your top priority and that you are going to 
work to ensure that any future plans aren't creating the kinds 
of risks that were so poorly monitored before?
    Mr. Scharf. Congresswoman, there is no question in my mind, 
there is no question in our board's mind, I don't think there 
is a question in the employees of Wells Fargo's mind, or 
shareholders, at this point, that our number-one priority is to 
fix these issues. I have said it internally. I have written it 
internally multiple times. I have talked about it on our 
quarterly earnings calls, where they have called for specifics 
relative to strategy and growth and other things like that, and 
I have said I am not in a position to give you information on 
that. I am focused on fixing these issues that we have, which 
are these regulatory problems and the underlying control 
infrastructure work, and that has to come before everything.
    So I deeply believe that, and I have told everyone who is 
associated with the company that that is the case. And I think 
given the work that we have to get done, that is totally 
appropriate.
    I'm sorry--your second question?
    Mrs. Axne. No, thank you. You answered that question 
exactly the way that I would like you to answer that question, 
and we will be, obviously, as you are fully aware, making sure 
that we are on top of that. And I appreciate you bringing that 
up. As the leader of the company, it is important for you to be 
making sure that message is being pushed down all the way 
through the ranks, and allowing for those folks who are in the 
front-line jobs to be able to push up to management as well, to 
ensure that there is a good culture.
    So thank you so much, because representing those employees 
and providing a voice for them truly is one of my biggest 
responsibilities out here. And I was really happy to see that 
Wells just announced an increase to its minimum wage. That 
said, I do want to ask you, will you continue to look for ways 
to ensure that all of your employees are paid a living wage, 
and put more money in their pockets, and what might be some of 
those things you are doing?
    Mr. Scharf. Congresswoman, we absolutely have to continue 
to look for ways to help our employees, especially the lower-
paid employees. When I got there and we looked at this issue, 
we did think it was appropriate to look at the cost of living 
in different parts of the country, so that we could represent 
to ourselves that we were thinking about what that living wage 
looks like.
    And so differentiating and paying $20 an hour in the 
highest-cost locations is, we think, very appropriate, and 
scaling it based upon that cost of living also seemed to make 
sense. As we go forward, that is something we should continue 
to look at. That is not something that we do once that just is 
set in stone. We need to make sure that we are being as 
conscious of that cost of living as we possibly can.
    We also have to look at the health care benefits. This past 
year, when we set premiums and put money into people's HSAs, 
the majority of the lower-paid people, if not all of the lower-
paid people, didn't see any increase, and many saw a decrease, 
and that is something else. That was done before I got there, 
but that is something that as we go through the process this 
year, we are going to take a look at and say, are we sharing 
health care costs appropriately across the company?
    And then certainly giving people an opportunity inside the 
company is extraordinarily important, whether it is within a 
location so that people can continue to grow, take on more 
responsibility and earn more money as time goes on, or do 
something in a different part of the bank is something that 
should be core to what our employees think of when they think 
of Wells.
    Mrs. Axne. I appreciate that. Last year, I asked Mr. Sloan, 
in front of this committee, about Wells Fargo's announcement to 
lay off 400 people in Des Moines, and whether those jobs were 
going to be moved overseas. To make matters worse, although 
those workers were found to be eligible for retraining and 
other help, that certification didn't come until just 2 months 
ago, so way too late to be of much use to a lot of those folks.
    Wells Fargo has always been an American bank. It still gets 
a significant majority of its revenue from the United States. 
And my priority will be to those people who work at Wells 
Fargo.
    Will you commit to fully considering where Wells has built 
its business and what it is going to do to make sure that we 
don't move jobs overseas?
    Mr. Scharf. Congresswoman, we would like to keep as many 
jobs in the U.S. as possible, and we will commit to offering 
retraining to anyone who winds up in a situation where we have 
to make a change in their location.
    Mrs. Axne. Thank you.
    Chairwoman Waters. The gentleman from Tennessee, Mr. Rose, 
is recognized for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters and Ranking Member 
McHenry, and thank you, Mr. Scharf, for being here today. 
Contrary to some of my colleagues, I want to applaud you for 
taking on this role. I note that it is a challenge, but with 
great risk comes great reward, and I applaud you for having the 
courage to step up to the plate and to hopefully rebuild one of 
our great American institutions.
    In many ways you are here today to not only answer about 
your plans moving forward with Wells Fargo, but, fair or not, 
you are also here to answer for the mistakes of your 
predecessors. Mr. Scharf, I understand you have led an 
intensive review of the bank since you became the CEO in 
October of last year, and to some extent, I know you have 
already addressed this, but could you discuss again what you 
learned from this review in terms of the culture at Wells Fargo 
and risk management and other related issues?
    Mr. Scharf. Congressman, I have had the opportunity to talk 
to so many of the employees at Wells Fargo whom I have found to 
be extremely open and forthcoming of their opinions of what we, 
as a company, and what the management team has done right and 
has done wrong. They recognize that the problems that we have 
are extraordinarily significant, and they look at management 
and they say, ``You need to do something very different than 
you have done.''
    So as we think about the work that we need to do, it is 
around culture, it is around structure, it is around people and 
jobs, and probably most importantly, because it sets the tone 
for so many things, it is about accountability, both for people 
in staying in jobs but also whether we are appropriately 
impacting them for both the good and the bad that they have 
done inside the company. And there are actions that we are 
taking on every one of those items to ensure that the company 
is run differently than it has been in the past.
    Mr. Rose. Thank you. One thing we have learned since 2016 
is that Wells Fargo's leadership then repeatedly provided 
incomplete information to the public. As the Republican staff 
report finds, evidence showed that former CEO Tim Sloan and his 
team provided incomplete and exceedingly optimistic information 
to Congress, the public, and the board of directors at Wells 
Fargo. Wells Fargo was no closer to complying with the 
regulators' consent orders when Tim Sloan resigned in March of 
2019, than when his team took over in 2016.
    For better or for worse, the financial services industry 
has been under a microscope since the financial crisis. And 
whenever a major bank like Wells Fargo fails to uphold its duty 
to their shareholders, their customers, the public, and their 
regulators, it reflects poorly on the entire industry. And when 
that happens, some of my colleagues here on this committee 
claim that the bank is too big to manage, and the financial 
services industry, as a whole, is rife with abuse. That is not 
the case.
    So the burden falls on you, Mr. Scharf, and Wells Fargo at 
large to prove to us, and to your regulators, that Wells Fargo 
is a changed institution.
    Mr. Scharf, we have talked a lot today about the changes 
the bank is making under your leadership to strengthen the bank 
going forward. As I listen to you talk, I am reminded of an old 
quote that I heard many times as a young man growing up, that 
trust takes years to build, seconds to break, and forever to 
rebuild.
    So I ask you, what are you doing? What is Wells Fargo doing 
to not only earn back the trust of your customers but also that 
of this Congress?
    Mr. Scharf. Congressman, we need to run the company 
fundamentally differently than we have run it in the past, and 
my approach, both here at Congress, with our employees, and 
with everyone outside the company, is to be completely open, 
forthright, and honest. I am not trying to paint a picture 
which is better or worse than anything I see, because you and 
others will find out.
    I live my life as simply as I can. There is one story. It 
is what I believe, and if find out that I am wrong, then I will 
deal with that and change the course.
    So what you are hearing from me is exactly what I think. I 
am not trying to minimize the work that is necessary. It is a 
lot of work. There is no question about that. But I do believe, 
based upon what I have seen at other institutions and the 
issues that we have, that we can run the bank in a way which 
will earn back the trust and respect of all those outside of 
our company.
    Mr. Rose. There is, of course, tremendous work left to be 
done from a reputational standpoint, and I hope you will commit 
to being transparent with Congress, your regulators, and the 
public every step of the way.
    Chairwoman Waters. Thank you. The gentlewoman from 
Virginia, Ms. Wexton, is recognized for 5 minutes.
    Ms. Wexton. Thank you, Madam Chairwoman, and thank you, Mr. 
Scharf, for joining us here today.
    Mr. Scharf, have you had the opportunity to review the 
House Majority staff's report?
    Mr. Scharf. Congresswoman, yes, I have.
    Ms. Wexton. Okay. And it is entitled, ``The Real Wells 
Fargo: Board & Management Failures, Consumer Abuses, and 
Ineffective Regulatory Oversight.'' Is that correct?
    Mr. Scharf. I believe so.
    Ms. Wexton. Now, you know that in this report, they cited 
the July 2019 OCC report of the examination which concluded 
that the OCC had not observed a drive towards greater 
consistency, and a large number of plans had to be submitted 
multiple times to the OCC. You do acknowledge that, right?
    Mr. Scharf. Yes, Congresswoman.
    Ms. Wexton. And that the OCC remains concerned about the 
overarching vision around remediation.
    Mr. Scharf. Yes, Congresswoman.
    Ms. Wexton. Okay. And you also then are aware that the 
report concluded that Wells Fargo's board abdicated its 
responsibility to oversee the bank's compliance with the 2016 
sales practices consent orders.
    Mr. Scharf. Yes, I am aware that is what the report says.
    Ms. Wexton. Do you agree that the board did not provide 
robust oversight of those consent orders?
    Mr. Scharf. Congresswoman, what I can talk about is what I 
have seen of the board since I have joined.
    Ms. Wexton. Okay.
    Mr. Scharf. I wasn't there.
    Ms. Wexton. That is fine. We will just focus on being 
forward-looking.
    Mr. Scharf. And what I--
    Ms. Wexton. Because as a result of this report--well, I 
don't know if it is a result of this report, but right after 
this report was released, two of your directors resigned 
yesterday. Is that correct?
    Mr. Scharf. They did resign Sunday, I believe.
    Ms. Wexton. Sunday. Okay.
    Mr. Scharf. Sorry. Yesterday morning.
    Ms. Wexton. Okay. And you also said, in response to an 
earlier question, that 70 percent of your board was new. Is 
that correct?
    Mr. Scharf. I said I believe that is approximately the 
number.
    Ms. Wexton. So, there has been a lot of turnover on the 
board since you took office?
    Mr. Scharf. Yes, there has been. Excuse me. I'm sorry. Can 
I correct myself? Since I joined the board, we have had one new 
board member join.
    Ms. Wexton. Okay. And as CEO, you serve on the board of 
directors, correct?
    Mr. Scharf. Yes, I do.
    Ms. Wexton. Do you have a role in selecting new members, in 
recruiting and selecting new members for the board of 
directors?
    Mr. Scharf. Our directors are selected first by our 
governance and nominating committee, which I am not a member 
of, and then they are voted upon by the full board. So, I would 
be aware of it. I would be part of a conversation but I don't 
have the responsibility to do that.
    Ms. Wexton. Okay. But you believe that the board's role is 
to provide oversight of the directors in the company--of the 
executives in the company. Is that correct?
    Mr. Scharf. Yes, I do.
    Ms. Wexton. And when looking for somebody to serve on the 
board, are you looking for somebody who can credibly challenge 
you? Would that be something that you would look for?
    Mr. Scharf. Congresswoman, again, I would be speaking just 
for myself.
    Ms. Wexton. For yourself, yes.
    Mr. Scharf. Not for the entire board. I think as a board, 
we absolutely need people who are going to challenge us, who 
come from different places, have different backgrounds, have 
different kinds of diversity, and that people with that 
diversity or background should help us get to the best 
conclusion.
    Ms. Wexton. The reason I ask is because Warren Buffett just 
sent out his annual letter to shareholders, just very recently, 
and in there he talked about the fact that corporate chiefs 
rarely bring in outside advisors who provide dissenting 
opinions, and that as a result, when seeking directors, CEOs 
don't look for pit bulls. It is the cocker spaniel that gets 
taken home.
    So for you, in your decision, when you cast that vote for 
who is going to replace the two members of the board of 
directors who resigned, will you commit to look for a pit bull 
and not a cocker spaniel?
    Mr. Scharf. Congresswoman, I absolutely want someone who is 
going to speak up, who is going to speak their mind, who 
understands things that I don't understand, and adds to the 
conversation. There is no question that I think boards are 
better off for having people like that.
    Ms. Wexton. And pushes back on behalf of shareholders and 
other folks and account holders?
    Mr. Scharf. Congresswoman, I absolutely believe that boards 
have to be independent and push back whenever appropriate on 
the management team.
    Ms. Wexton. Thank you very much. I yield back.
    Chairwoman Waters. The gentleman from North Carolina, Mr. 
Budd, is recognized for 5 minutes.
    Mr. Budd. Thank you, Madam Chairwoman, and thank you again, 
Mr. Scharf, for being here today.
    So who knew, 33 years ago, as a teenager in Advance, North 
Carolina, opening my very first checking account, with my dad 
taking me there, that it would be at First Union National Bank, 
later part of Wachovia, and then later Wells Fargo? And who 
also knew that it would be right next to my congressional 
office? So, this bank is important to me, not just for those 
sentimental reasons, but because it is important to my 
constituents, and to thousands and thousands of families there 
in my district. And it is also important because it is 
important to our economy.
    I want to again thank you for coming a few months ago to 
meet with my staff and to talk about what you are bringing to 
Wells Fargo, and I want to commend you, from what I understand, 
on your fierce commitment to fixing the wrongs of your 
predecessors. It is not an easy matter to deal with, but I have 
no doubt in my mind that you are the right person for the job.
    So, Mr. Scharf, in your day one letter to Wells Fargo 
employees, you stated this: ``The seriousness of what we do 
brings tremendous responsibility. To that end, our top priority 
is to run the company with the highest standards of operational 
excellence and integrity. Risk, control, and compliance are the 
price of admission, and will always be the highest priority. We 
cannot serve our customers in the manner they, and all other 
stakeholders, expect of us if we do not operate the company to 
these standards.''
    So my question is, can you please elaborate more on some of 
the new standards you are putting in place at Wells, and how 
that will reshape the culture or the institution for the 
betterment of the consumers?
    Mr. Scharf. Thank you, Congressman. I do think it is 
extraordinarily important that there is clarity inside the 
organization of what is expected, and that starts with the 
management team and the responsibility and accountability that 
we take for either driving the success or the failures across 
the organization.
    We have dramatically changed both the compensation and the 
performance management review system for our senior folks. I 
think if you look back historically at how we pay people, there 
was not the accountability that most people would expect, given 
the results that we have had.
    When we look at what we are doing going forward, I think 
you will see a meaningful change in that. We carve out a 
specific piece of the individual's performance, the company 
performance, which we are very honest about, and then we say, 
``What are you doing in order to do the appropriate risk and 
control work?'' To the extent people aren't doing that, and 
that includes the remediation on these consent orders, that can 
only be a takeaway. Because as you talked about in my note, I 
believe it is the price of admission. That sends a very 
powerful signal through the organization in a way that didn't 
exist before.
    And I don't want to take up all of your time by going on 
about that one question, but I think if I had to say one thing 
which I think will set the tone inside the company, which is 
extremely different, I think that ranks towards the top.
    Mr. Budd. Very good. Thank you. So, a little more on 
incentives. It has now been several years since the bank's 
unauthorized scandal came to light. In that case, it was clear 
that the bank's sales culture was one of the root causes, and 
the bank has admitted as much.
    Your predecessors ultimately failed to change the sales 
culture of the bank in an impactful way. How can you ensure 
that the culture shift that you are implementing at the bank 
will have a lasting and meaningful impact? I get what you were 
saying earlier, thank you, but how do we know that this is 
going to last and be meaningful?
    Mr. Scharf. Congressman, I do agree that we have to ensure 
that we don't just fix this problem once but we fix it 
everywhere inside the institution, and we have a systematic 
process to ensure it doesn't happen again.
    In addition to all of the risk management controls that we 
have spoken about, that now are being built out across the 
whole company, we have just added a new role called our sales 
practice oversight officer, which looks independently at all of 
our sales practices across the entire company, is responsible 
for ensuring that we do not have any gaps in our practices, and 
ensures that they all operate in a manner which represents the 
way we want the company to be run in the future. That is not 
just looking and approving the plans, but it is ensuring that 
the right reporting exists and the right management processes 
exist to support the kind of behavior that we know we need at 
Wells Fargo.
    Mr. Budd. Just as quickly as possible, it is no secret that 
regulators were asleep at the switch when the bank was tied up 
with the scandal. What measures are you taking to ensure that 
all current and future practices are above board with 
regulations?
    And it seems that I am out of time, so I would ask you to 
respond in writing. Thank you.
    Chairwoman Waters. The gentlewoman from Pennsylvania, Ms. 
Dean, is recognized for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman. And thank you, Mr. 
Scharf, for being here. Like many of my colleagues here, I 
really do wish you well. Wells Fargo needs powerful leadership 
to right the ship and to correct the wrongs of the past. We 
have had a lot of conversation today about governance, about 
culture, about what is going on presently, a review of those 
systems and leadership moving forward.
    What I would like to focus on is the people left in its 
wake, and the harms that have been done. As important as it is 
that you right the ship moving forward, I believe everyone who 
has been harmed by Wells Fargo is entitled to remedies, a full 
return of their damages.
    We know from the OCC reports--and I will read just a part 
of it, from the Majority report, page 63--that one year after 
setting up a center of excellence, a customer center of 
excellence, the OCC found that the bank's remediation program 
is critical to the organization, as the current approach to 
remediation is inefficient, inconsistent, often lacks 
appropriate accountability, and takes far too long.
    I am going to use one simple example, because I think 
personal stories often do it. In 2017, Samir Hanif had his car 
repossessed. It was under a loan from Wells Fargo. I think 
unbeknownst to him or duplicating to him was insurance sold, 
car insurance that he did not need, driving him into 
delinquency on the car. After paying hundreds of dollars to get 
the car back, he found that the greater harm to him was his 
credit score. He had lost 100 points on his credit score as a 
result of the corrupt, fraudulent practices of Wells Fargo. 
That is one case.
    So my question is, in your own analysis, has your company 
done a full look-back on every single person who was harmed, 
whether it is the 3.5 million fake accounts; the fraudulent 
sale of car insurance; the wrongful disclosures, which your 
predecessor said came as a result of a computer glitch, a 
years-long computer glitch; the taking of people's homes 
improperly; the failure to modify mortgages improperly; lost 
houses; lost cars; lost creditworthiness.
    How many people have been harmed, and are you looking 
individual by individual to know their damages and get them 
compensation?
    Mr. Scharf. Congresswoman, I share both the passion as well 
as the frustration. When we look at the things that we have 
done and the mistakes that we have made, it is one thing to say 
that we have made mistakes and we will make them better going 
forward, but we have to do the right remediation work. There is 
no question in my mind that we need to move faster and we need 
to be as complete as we possibly can in the thinking.
    We have a significant number of people working on this, but 
with me coming into the company, and a new chief operating 
officer coming into the company, we want to take a fresh look 
at what that actually means.
    Ms. Dean. Well, that is what I am asking you. What have you 
commanded your team to do in terms of the--we are taking 
millions of customers.
    Mr. Scharf. Right.
    Ms. Dean. What have you commanded that they do in terms of 
looking at the harm? And I hate the word, ``remediation.'' That 
sounds like something that you do out in the yard when there is 
a spill. This is damages to human beings. This is customers who 
have suffered harms. What are you doing to identify the harm 
and compensating them for that harm?
    Mr. Scharf. What I have directed our people to do is to 
take a fresh look at every one of the instances where we have 
harmed consumers, and to ask the question, have we sized the 
answer properly, and what can we do to make sure that the work 
is done much more quickly than it has been to date?
    Ms. Dean. Let me contrast what your predecessor said. For 
example, on mortgage foreclosures, he said that they took a 
look and where they had made some mistakes they sent $15,000 
checks to people, and if they heard nothing back, they thought 
that was probably satisfactory. Is that your approach?
    Mr. Scharf. Our approach is to make sure that everyone who 
is harmed gets compensated properly.
    Ms. Dean. How do you calculate that? That is what I want to 
know.
    Mr. Scharf. Congresswoman, I would be glad to take that 
offline and talk about some examples of what that is, piece by 
piece.
    Ms. Dean. I would love to know that, but in a global way. 
So, each and every person gets compensated. Thank you very 
much, and I wish you well with your work. I sincerely do.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Gooden, is recognized for 5 minutes.
    Mr. Gooden. Thank you, Madam Chairwoman. I am going to 
yield my time to Mr. Steil. Thank you.
    Mr. Steil. Thank you, Mr. Gooden, and thank you, Mr. 
Scharf, for being here today. Wells Fargo needs strong, ethical 
leadership to turn the tide. The board thinks you are that 
person. I think time will tell. But I appreciate you being here 
today to talk about what you are doing.
    In your day one letter to Wells Fargo employees, you wrote 
that your firm needs to be doing the following: ``Set clear 
priorities and execute, execute, execute. Words are nice but 
actions are what matter. Priorities, strategies, and ideas are 
useless without clear execution.''
    I want to talk to you today about the priorities and about 
your execution, your leadership at Wells Fargo. Can you walk me 
through what your priorities are that have been set, and the 
status of those priorities? What are the most important 
priorities, and what needs to be achieved to fix Wells Fargo 
and restore the public trust? And importantly, what has 
actually been achieved and what has not yet been achieved? And 
for those that are unresolved, what is getting in the way of 
that successful execution?
    Mr. Scharf. Congressman, I think the most important thing 
that I did when I arrived at the company, when I talked about 
setting the clear priorities, is making sure that everyone 
understands that our first priority, by far, is to do all of 
the regulatory work that is required. We need to do it both 
because our regulators have asked us but also because it is the 
right thing to do to build the proper foundation.
    It wasn't clear to me, inside the company, that everyone 
understood that, and when we looked at the activities that 
people were spending their time on, and where we were investing 
our money, it equally wasn't clear to me.
    So setting that as a priority, and then as we go through 
our budgeting exercises and business reviews, asking the 
questions, are we doing everything that we should and putting 
the appropriate resources towards the activities? You wind up 
with a different answer, I think, than we had last time.
    I think the way we go about managing these activities today 
is very, very different. The amount of time that I am spending 
on these activities is 70 to 80 percent of my time. We brought 
in a new chief operating officer, under whom all of the 
responsibility for driving the work across the company on the 
remediation now sits. He is probably spending 90 percent of his 
time on these activities.
    We, as a company, are working together differently than we 
worked together before, and so the priority, the process, the 
people. And then if I were to dig down and talk about each of 
the individual consent orders and how we are going about 
thinking about doing the work, it is a far more professionally 
managed set of circumstances than it was when I got there.
    This is just setting the framework for doing the work, and 
I remind everyone internally, all the time, that what we have 
done is we have put in place our ability to get the work done, 
but we have to go do it piece by piece. It is a lot. It is 
going to take a period of time. I have not committed to that 
period of time because I am not sure what it is yet. But we 
will stay as focused as we have to be to ensure that we get to 
the finish line on it.
    Mr. Steil. Thank you. A lot of my colleagues here have 
discussed concerns about the culture at Wells Fargo when you 
arrived, and it is well-documented about some of those abuses. 
Can you just touch on some of the recruitment efforts, in 
particular at the senior staff level, that played into Wells 
Fargo's efforts to change that corporate culture?
    Mr. Scharf. Sure. I think one of the problems that we had 
across the company is we didn't always put the right people in 
the right jobs. I said that in my opening remarks. The culture 
of the company was more family-like, and family can be good but 
family can be bad. Making the tough decisions about who really 
is capable and who is not capable, who is performing and who is 
not performing, is extremely important, at all levels in an 
organization, and I don't think we have done that as well as we 
could.
    So if people don't have the right skills or don't have the 
right experience for things that we need, we need to get people 
who do, as long as we treat people with the utmost respect. So 
when we look at the people that we have brought in from the 
outside, or people that we promoted up from within, I think 
people, both inside and outside the company say that they fit 
the bill. They have the experience, they have the know-how, 
they have the proven ability to get the work done.
    And so, again, we are set up with the right infrastructure 
now to get the work done, in a way that we weren't 4 months 
ago.
    Mr. Steil. Thank you very much. I appreciate you being 
here, and we will continue to observe the progress that you 
will be making. Thank you very much. I yield back.
    Mr. Scharf. Thank you.
    Chairwoman Waters. The gentleman from Utah, Mr. McAdams, is 
recognized for 5 minutes.
    Mr. McAdams. Thank you, Madam Chairwoman, and thank you, 
Mr. Scharf, for being here today.
    It was almost one year ago when another Wells Fargo CEO sat 
in that same chair, promising to turn the company around, and I 
will repeat to you what I told Mr. Sloan. I want Wells Fargo to 
succeed because I want these bad practices to cease, and for 
customers, for veterans, for small businesses, I want them not 
to be taken advantage of. I want Wells Fargo to succeed because 
Wells has 3,000 employees in my State, and I want those 
employees to be proud of where they work, and not to have a 
workplace that pushes them to act unethically or illegally. And 
I believe that you share these same sentiments.
    So, Mr. Scharf, you generally accept that Wells Fargo 
failed its customers, failed its employees, and must do 
substantially better, correct?
    Mr. Scharf. Congressman, yes, I do.
    Mr. McAdams. Thank you. Look, I am glad you answered that 
way because to answer otherwise would start us off on a very 
bad foot.
    The extent of Wells' failures over the last decade runs far 
and wide. So, let's talk about how we do better. Before the 
hearing today, I re-read the note that you sent to all 
employees on your first day as CEO, and I really appreciated 
that note. One of the points you made in that communication was 
that Wells needed to move with a sense of urgency, and you said 
that all stakeholders expect you to move forward faster than 
ever, but at the top of that list is to remediate past issues.
    And one of the things in the Majority staff report was that 
Wells Fargo's board and management prioritized financial and 
other considerations above fixing issues that were identified 
by regulators. Can you commit to me and to this committee that 
you will prioritize fixing the past mistakes of Wells rather 
than prioritizing short-term profits?
    Mr. Scharf. Congressman, these are the most important 
issues we have. We will prioritize them at the top of 
everything. I will not only commit to you here, I have told 
employees that verbally, I have told them that in letters, and 
I have told our shareholders that on an earnings call.
    Mr. McAdams. Thank you, and we expect to see that happen, 
but thank you for your commitment to that.
    Also in your note to employees was that your people set you 
apart, and that the best and brightest people work for Wells. I 
pressed Mr. Sloan on employee issues last year and the ability 
for employees to raise concerns, and his answers displayed a 
lack of understanding of the magnitude of the problem that he 
had at the company.
    At the heart of the past Wells scandal, I think was a 
culture issue, a culture where profit was king and where 
employees didn't feel like they could raise their voices to 
flag concerning activities. Can you please tell me how you are 
soliciting employee feedback and incorporating the feedback 
into your plans?
    Mr. Scharf. Congressman, we do employee surveys, and even 
more important than actually doing the survey is making sure 
employees know that you read them, you listen to it, and you 
are going to do something about it. So I have spoken about the 
results that I have seen in the employee survey, and many of 
the actions that we have taken are a result of what we have 
seen.
    We have town hall meetings. I host a town hall meeting 
every quarter of every employee inside the company, and I 
encourage people to give me feedback, and I get feedback. I get 
hundreds and hundreds and hundreds of emails any time I send 
something out, not just after those quarterly meetings, and 
even between them.
    Mr. McAdams. And are you ensuring that employees can give 
that feedback anonymously? It sounds like they can give it 
outside of the ordinary chain of command, but also do so 
anonymously so they are not afraid of retaliation?
    Mr. Scharf. Congressman, absolutely. I get both signed as 
well as anonymous, and then we also have a hotline where people 
can talk to us anonymously.
    Mr. McAdams. Thank you, Mr. Scharf.
    Changing topics, one thing that has been dominating my 
discussions with constituents has been coronavirus and how best 
to prepare for its potential effects on families, our economy, 
and on our government. And as more employees are affected and 
forced to quarantine, the economic effects of that will weigh 
heavily on those individuals and on their families. How are 
they going to put food on their table, or how are they going to 
pay their mortgage, et cetera? How is a small business owner 
going to keep the lights on as his or her supply chain is 
disrupted?
    Can you tell me what steps Wells Fargo is prepared to take 
to respond to this pandemic, and how it will assist its 
individual and small-business customers who are struggling due 
to lost income or business disruptions? Are there such things 
as loan forbearance, flexible repayment schedules, late payment 
fee waivers, et cetera?
    Mr. Scharf. Congressman, this is something that we are--we 
absolutely want our customers to look at us as a source of 
strength for them. We don't know where this ends, and it is 
something that we think about and understand the impact it will 
have on individuals' lives. And we do ask the question both for 
our employees as well as our customers, what can we do to be 
there for them?
    So as of today--not as of today, but sitting here today, we 
have a number set up that we are publicizing to our customers 
where they can call us, and talk about their hardships. We will 
talk to them about extension of fees. We will talk to them 
about other things that we could do for their loans.
    Mr. McAdams. Thank you, and I yield back.
    Chairwoman Waters. The gentleman from Wisconsin, Mr. Steil, 
is recognized for 5 minutes.
    Mr. Steil. Thank you, and I yield to my colleague, Mr. 
Gooden from Texas.
    Mr. Gooden. Thank you, Mr. Steil, and I thank you for being 
here, Mr. Scharf. I just have a few questions, and a yes or no 
will suffice, but feel free to answer as long as you would 
like. Is Wells Fargo the largest bank in the world?
    Mr. Scharf. No. Wells Fargo is not the largest.
    Mr. Gooden. Is it the largest bank in the Western 
hemisphere?
    Mr. Scharf. No, we are not.
    Mr. Gooden. What about North America?
    Mr. Scharf. No, we are not.
    Mr. Gooden. So not the United States either, I am guessing.
    Mr. Scharf. No, Congressman.
    Mr. Gooden. Of the banks that are larger than Wells Fargo, 
are you aware of any that were involved in a scandal of such 
magnitude as Wells Fargo's, and if so, about how many?
    Mr. Scharf. I am not aware of another bank that has had the 
extent of the issues that we have had.
    Mr. Gooden. I guess what I am getting at is, it is obvious 
that there are large banks in this country that are doing a 
pretty good job, and is it fair to say that Wells Fargo's 
problems are perhaps unique and you all are trying to get to a 
point where, like the other large banks in our nation, they are 
able to operate fairly smoothly and honestly, despite being 
large?
    Mr. Scharf. Congressman, I do believe that we have not been 
run the way we should be run, and our culture wasn't what it 
should be, but it is possible to change those things, and it is 
possible to run the company well.
    Mr. Gooden. I appreciate that, and I thank you for being 
here. I also wanted to kind of just make an observation. I am 
looking through some of the Majority's report, and it has been 
very helpful, and I appreciate all the work they put into it. 
Before I made that observation, I was just going to point out 
that we had the head of the OCC here last month, and kind of 
one of the overarching themes was that there was mismanagement 
going on and he was, to paraphrase, doing the bidding of the 
Trump Administration.
    A report that this committee put out, a news release, on 
February 3, 2020, kind of really blasted the FDIC's and the 
OCC's plans to weaken components of the Volcker Rule. And in 
the press releases that I have read it made clear that they 
held these accountability groups, the FDIC, and the OCC, 
responsible for putting out the--for doing the wishes of the 
Trump Administration. So, they kind of blamed the 
Administration for decisions by the OCC.
    The reason I bring that up is because when I look at this 
report, on page 23, Committee Staff Findings--and I don't 
dispute these findings; I am sure they are accurate--it says 
before the 2016 and 2018 consent orders, financial regulators 
knew about serious enterprise-wide deficiencies at Wells Fargo 
for years, without alerting the public.
    Well, our great President was elected in 2016. And so, when 
I read all of these deficiencies and regulatory efforts, page 
24, on April 19th, 2017, a report issued by the OCC's Office of 
Enterprise Government and the Ombudsman reviewing the OCC's 
supervision of the bank sales practices concluded that the OCC 
did not take timely and effective supervisory actions. The OCC 
failed to conduct comprehensive reviews in testing and 
monitoring systems and controls over sales practices between 
2011 and 2014. That is right in the middle of the Obama 
Administration. I just can't help but wonder how this report 
would read if a Republican were in the White House during the 
years of mismanagement by the regulatory groups that just 
allowed this to go on. And so my conclusion that I would like 
to make is that the Trump Administration has really done a 
great job.
    In their first 2 years, they have executed on enforcement 
action, and I think that things are really turning around, and 
I want to applaud the Trump Administration for their progress. 
I am disappointed that so much of this was apparently asleep-
at-the-switch actions during the Obama Administration, but I 
wish you luck and I thank you for coming here before us today. 
And I yield back to the chairwoman.
    Chairwoman Waters. The gentleman from Illinois, Mr. Garcia, 
is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman, for 
holding this hearing along with the ranking member, and thank 
you, Mr. Scharf, for being here. In 2018, the Federal Reserve 
imposed an asset cap on Wells Fargo due to, in part, pending 
compliance issues at that time. Despite this, Wells Fargo 
remains one of the country's biggest banks, but that wasn't 
always the case. In 1998, Wells Fargo merged with Northwest. In 
2017, the independent directors of Wells Fargo released a 
report on the company's sales practices, and they found that 
the company's focus on cross-selling and aggressive sales goals 
came largely from Northwest. Mr. Scharf, is that correct to 
your knowledge?
    Mr. Scharf. That is what I have been told, but I don't have 
any evidence of that.
    Mr. Garcia of Illinois. In the decade after the Northwest 
merger, Wells Fargo acquired the National Bank of Alaska, First 
Security Corporation, HD Vest Financial Services, Placer Sierra 
Bank, Greater Bay Bancorp, United Bank Corporation of Wyoming, 
and on and on, but you get the point. Lots of mergers. Then in 
2008, Wells Fargo acquired Wachovia, doubling the size of the 
bank. Is that correct, approximately?
    Mr. Scharf. I believe so.
    Mr. Garcia of Illinois. Again, according to the independent 
directors report, Wells Fargo's ``sales-oriented culture'' 
quickly spread through Wachovia branches. Is that correct?
    Mr. Scharf. I do believe the Wells Fargo management model 
was implemented in the Wachovia branches, yes.
    Mr. Garcia of Illinois. So from my perspective, these 
constant acquisitions have not only made Wells Fargo bigger and 
more complex, but have also brought irresponsible and illegal 
corporate practices to more and more customers, thus the 
consent pieces that are out there. Mr. Scharf, if the Federal 
Reserve releases Wells Fargo from its asset cap, will you 
commit to not pushing for more acquisitions?
    Mr. Scharf. Congressman, I am not thinking about anything 
like that today. What I am thinking about is the work that we 
have to do, and I think that there are examples, plenty of 
examples of acquisitions that have taken place where companies 
have been run properly. Our issues relate to the fact that we 
didn't have the appropriate management in place. We didn't have 
the appropriate controls in place. We didn't have the 
appropriate risk infrastructure in place.
    Mr. Garcia of Illinois. As you have pointed out, so that of 
sort of sounds like a no to me. But, frankly, Wells Fargo, 
unchanged by your response, continues to illustrate how endless 
acquisitions and mergers are dangerous. That is why I 
introduced, with Senator Warren in the Senate, the Bank Merger 
Review Modernization Act, to stop the rubber stamping of bank 
mergers. Between 2006 and 2017, the Fed reviewed 3,819 bank 
merger applications. It approved all of them.
    As banks get larger and larger, they become more difficult 
to manage, as I am sure you will experience, to regulate and 
enforce existing rules, and they risk becoming too-big-to-fail 
and put our entire economy at risk. This endangers all of us, 
but especially working-class families like the ones that I 
represent in Chicago and a part of the suburbs. After the 2008 
crash, dozens of my friends, neighbors, and constituents were 
foreclosed on. We sold my parents' flat. The impact of big 
banks' greed wiped out wealth for millions, including more than 
half of the wealth that Black Americans owned in our country. 
We cannot let that happen again.
    My bill requires Consumer Financial Protection Bureau 
approval of mergers, requires regulators to evaluate systemic 
risk factors of proposed mergers, requires disclosure of 
discussions between institutions and regulators that go on 
before the merger is filed, and more. We need this bill so that 
what happened at Wells, illegal practices on an enormous scale, 
won't happen again. Thank you, and I yield back, Madam 
Chairwoman.
    Chairwoman Waters. The gentleman from New York, Mr. Zeldin, 
is recognized for 5 minutes.
    Mr. Zeldin. Thank you, Chairwoman Waters and Ranking Member 
McHenry, for holding this hearing. Thank you, Mr. Scharf, for 
being here today, and for your testimony. We met recently, and 
I found you to be highly motivated to do a good job, genuine, 
and candid with all of your answers. And as someone who 
represents the 1st Congressional District of New York, where 
you have been spotted from time to time on the beautiful East 
End of Long Island, we are proud to see you in the position 
that you are now.
    I wanted to talk to you a little bit about some of the 
veterans' issues that I had discussed with your predecessor the 
last time he was here. You can't be blamed for what happened 
before you arrived, but you are here today to answer questions 
about the path forward, and that is much appreciated. You have 
publicly highlighted initiatives that you are undertaking, 
including a flatter line of business organizational structure 
that reorganizes leader responsibility specifically by creating 
five principal lines of business to ensure clear authority, 
accountability, and responsibility. It is clear you want to 
communicate progress, but also be upfront about what went 
wrong. Under previous leadership, Wells Fargo had an 
unfortunate history of wrongly treating active-duty 
servicemembers and veterans. For example, it has been widely 
documented that the bank improperly repossessed cars from 
active military servicemembers and overcharged veterans for 
refinancing their mortgages. Can you elaborate on some of the 
initiatives that you have been working on to help veterans in 
the wake of the scandal?
    Mr. Scharf. Yes, thank you, Congressman. First of all, I 
should start with just the statement that we have zero 
tolerance for Servicemembers Civil Relief Act (SCRA) errors 
inside the company. The things that you described, as well as 
some of the other things that others have described, and the 
harm that we have caused is completely inexcusable, and just 
flies in the face of who we should be as a company.
    Specifically, for current members of the military and 
former military, we have the utmost respect for what they do. 
And so, we have to make sure that for that population, as well 
as for other populations, that we have all of the right 
controls in place. What I believe that we have in place and is 
effective at this point is a centralized group to review all of 
those that are covered by SCRA to ensure that those mistakes 
where harm was caused doesn't happen again.
    As we continue to go through my process of reviewing the 
company piece by piece, we will go and look at that to ensure 
it is as robust as it needs to be across all the businesses 
inside the company. I am told that people believe that is the 
case today, but we will verify it.
    Mr. Zeldin. Thank you, and I appreciate a continued open 
line of communication between you and not just myself and my 
team, but everyone on this committee on that issue, which is 
close to my heart, as I would imagine it is for everyone on 
this committee. Transitioning a little, I just wanted to talk 
about a topic that is of growing concern to me and my 
constituents, which is the de-banking of legitimate, lawful 
businesses due to pressure from social activists.
    I will give you an example. I am the proud leader of H.R. 
5595, the Israel Anti-Boycott Act, which would prohibit 
boycotts or requests for boycotts imposed by international 
governmental organizations against Israel, and would protect 
American companies from being coerced to provide information to 
those organizations for the purpose of furthering boycotts 
against Israel. This legislation does not impede the right of 
any individual American to boycott or criticize Israel. It is 
okay to have reasonable, legitimate criticism of any 
government, including our own, or our allies like Israel, but 
this hate-fueled movement is not all about affirming the rights 
of Palestinians. Likewise, the pressure and coercion from those 
cloaked under the guise of social activism to de-bank lawful, 
legitimate businesses in the U.S. is not only wrong, but I 
worry this type of tactic could seep into insidious movements, 
like the boycott, divestment and sanctions (BDS) movement, when 
it comes to pressuring those who provide financial services.
    I understand you are running a bank, and that lending 
requires discretion in underwriting, but can you assure me that 
Wells Fargo's internal processes will not discriminate against 
creditworthy individuals and businesses, no matter how those in 
the public with loud, extreme opinions may try to cut off 
access for them?
    Mr. Scharf. Congressman, we intend to treat all individuals 
fairly.
    Mr. Zeldin. Thank you. There has been an immense amount of 
public power in government, advantages entrusted to banks to 
facilitate commerce, and they should not abuse those privileges 
acting as de facto regulators. My time is up, so I yield back.
    Chairwoman Waters. The gentlewoman from Texas, Ms. Garcia, 
is recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman, and thank 
you for holding this very important hearing so that we have an 
opportunity to visit with the CEO of Wells Fargo Bank. And, Mr. 
Scharf, I know that we were originally scheduled to have you 
come by the office to visit, and it got canceled and not 
rescheduled, so could we work on that?
    I wanted to quickly ask you, on February 12th, Wells Fargo 
announced that it would no longer require mandatory arbitration 
for future sexual harassment claims by employees. I applaud you 
for that. I think that is a step in the right direction. 
However, Wells Fargo still includes mandatory arbitration 
provisions in their credit card agreements and in their 
consumer account agreements. When can we see changes there? 
This body has passed a bill to end arbitration clauses in 
contractual agreements. I know that I personally have been 
forced to sign some, and I didn't want to. So, when can we 
expect you to remove those clauses from those type of 
agreements?
    Mr. Scharf. Congresswoman, as you pointed out, we did make 
those changes to employees regarding sexual harassment. We have 
also been able to settle the sales practice exams without 
referring those to arbitration as well, so there are places 
that we have looked around the company. We want to have a 
process in place that is fair and effective for both employees 
and our customers, so this is something that we have just 
started to look through, and there is nothing more to report on 
that today. But as we continue to think about it, we would be 
willing to continue to engage with you on the topic.
    Ms. Garcia of Texas. Great. So was this a practice that you 
also maintained in your previous employment in the banking 
industry?
    Mr. Scharf. I don't believe BNY Mellon had arbitration, but 
I am not exactly sure.
    Ms. Garcia of Texas. Could we check on that, too?
    So you are saying today that you can't commit to get us on 
the right track on those particular agreements?
    Mr. Scharf. Congresswoman, I believe that we have a goal of 
being fair and effective in how we handle disputes with our 
customers and our employees. There are different ways to 
accomplish that, and we are going to look and determine what we 
think is the best way to do that.
    Ms. Garcia of Texas. Well, this body has found that 
arbitration clauses were not fair to the consumer, and I can 
tell you as a consumer myself, I find them really repugnant, 
and as an attorney and a former judge, I find them repugnant. I 
know that you also deny consumers the right to participate in 
any class action lawsuits or class arbitrations against the 
bank. Is that true, and when can we see a change in that?
    Mr. Scharf. Congresswoman, I don't know the specifics of 
that.
    Ms. Garcia of Texas. You don't?
    Mr. Scharf. I do not.
    Ms. Garcia of Texas. Okay. Well, when you go back to your 
office, could you check into that or add it to your list, so we 
can work on that also?
    Mr. Scharf. I would be glad to talk to you about that.
    Ms. Garcia of Texas. Well, great. Thank you. Now, I want to 
go back to an answer that you gave to one of my colleagues 
earlier when we were talking about a lot of the accountability 
issues with the prior management of the bank. And you said that 
you will no longer use any reviews based on sales, that you 
would be focused on customer service, and that you would look 
at balanced growth. What does that mean?
    Mr. Scharf. Congresswoman, I was referring to the incentive 
plans that have been changed, specifically in the consumer 
bank, where the meaningful part of the compensation was based 
upon sales goals that led to this behavior. Those have been 
removed, and there are now several different pieces that go 
into the evaluation, one of which is customer experience. The 
second has to do with balances that exist inside the customer 
accounts.
    Ms. Garcia of Texas. You mean the dollar balances, or what 
kind of balances are you talking about?
    Mr. Scharf. Yes, the balances. The dollar balances.
    Ms. Garcia of Texas. So, they will score more points on 
their reviews if they handle a $1 million bank account versus a 
consumer account of $100?
    Mr. Scharf. No. Instead of just looking at the numbers of 
accounts, because the numbers of accounts is a big part of what 
led to the problems that existed, we want to attract more 
balances inside of the branches. We have different bankers who 
cover different customers at different wealth levels so that we 
aren't judging those who deal with--
    Ms. Garcia of Texas. But you are not suggesting that the 
bigger the bank account number, the better treatment that 
person is going to get?
    Mr. Scharf. No, absolutely not.
    Ms. Garcia of Texas. And if the average Joe walks in with a 
$200 bank account, they are not going to get treated 
differently because the person reviewed is going to get more 
points for the higher value?
    Mr. Scharf. They should not be treated differently.
    Ms. Garcia of Texas. Thank you. Thank you, Madam 
Chairwoman. I yield back.
    Chairwoman Waters. The gentlewoman from California, Ms. 
Porter, is recognized for 5 minutes.
    Ms. Porter. Mr. Scharf, have you seen, ``Harold & Kumar Go 
to White Castle?''
    Mr. Scharf. Excuse me?
    Ms. Porter. Have you seen the movie, ``Harold & Kumar Go to 
White Castle?''
    Mr. Scharf. No, I have not, Congresswoman.
    Ms. Porter. There is a famous scene in that movie where 
Neil Patrick Harris borrows a car and completely trashes it. 
And Wells Fargo lends money to consumers to buy cars, and Wells 
Fargo wants the consumers to take good care of the car. That is 
the collateral, protect that value, but there is always this 
Neil Patrick Harris risk. Someone crashes the car, defaults on 
the loan, and the value is not enough, and there is a risk of a 
loss. To guard against that loss, Wells Fargo has consumers pay 
for GAP waivers. ``GAP'' stands for ``guaranteed asset 
protection,'' and the GAP waiver cancels the remaining balance 
on the loan if the regular auto liability payout after the car 
is damaged is insufficient.
    But when someone pays off the loan, there is no need for 
that GAP waiver. There is no need for debt cancellation because 
the debt is paid off, but you, Wells Fargo, keep charging for 
that GAP waiver. You didn't tell consumers after they paid off 
the loan early that you owed them money back, about $350 each. 
Effectively, the bank stole this money from 1.7 million 
consumers nationwide, leaving Wells Fargo sitting on over $600 
million in ill-gotten gains. How much of that $600 million that 
Wells Fargo owes consumers in GAP overcharges has been 
returned?
    Mr. Scharf. Congresswoman, I don't know the exact number, 
sitting here, of what we have returned.
    Ms. Porter. Okay. The chart on the side, this is how much 
you owe, $600 million. This is how much you have returned, 
zero. You told me in my office that Wells Fargo in the past has 
been penny wise, but pound foolish, and I agreed, resisting 
doing what is right and paying consumers. And I really saw that 
when I was the monitor for the State of California during the 
foreclosure crisis. So if you are here today to tell us that 
Wells Fargo has changed its ways, you should have no problem 
committing to giving these people their own money back in terms 
of GAP overcharges. Will you commit to give them their money 
back?
    Mr. Scharf. Congresswoman, there is no question if we have 
harmed customers, then we should, in fact, do that, and we will 
go back and take a look at the specific example and understand 
why it hasn't been done, and how we can move quickly to rectify 
it.
    Ms. Porter. This is the pleading in that case that is 
pending in which Wells Fargo is currently arguing that even 
though it charged people for many years of GAP insurance, and 
the consumer paid off the loan early, they have not, in fact, 
refunded that GAP insurance. And that $350 means a lot. It is 
18 bags of groceries for families. So I would love you for you 
to commit to doing that. I also wanted to ask you, have you 
heard of the song, ``Mammas, Don't Let Your Babies Grow Up to 
be Cowboys?''
    Mr. Scharf. I don't believe I have.
    Ms. Porter. It is written by an American hero, Willie 
Nelson. I have three kids, Mr. Scharf, and I am thinking of 
writing a new song, ``Mammas, Don't Let Your Babies Grow Up to 
be Bank Tellers.'' Mr. Scharf, how many of your tellers are 
currently receiving public assistance in this country?
    Mr. Scharf. I am not aware, Congresswoman.
    Ms. Porter. Right now, one-third of bank tellers in the 
United States receive public assistance. Madam Chairwoman, I 
would like permission to enter into the record the study from 
the University of California-Berkeley that shows that the cost 
of public benefits to families of bank tellers is almost $900 
million per year.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Porter. So, taxpayers are subsidizing Wells Fargo's 
wages to the tune of $900 million per year. I don't want my 
kids to grow up and be Wells Fargo tellers because, 
statistically speaking, one of the three would end up needing 
public assistance. Is Wells Fargo profitable?
    [No response.]
    Ms. Porter. Is Wells Fargo profitable?
    Mr. Scharf. I believe it is, yes, Congresswoman.
    Ms. Porter. You believe it is? It is $19.5 billion last 
year, so we can round that up to $20 billion. That is profit. 
So the bank can afford to pay its tellers significantly more. 
Do you think the hardworking taxpayers of this country should 
be shoring up Wells Fargo's teller salaries when the bank has 
profits of $20 billion a year and paid out $30 billion in 
buybacks and dividends last year?
    Mr. Scharf. Congresswoman, I believe we should pay people 
fairly, and I believe the actions that we have taken, 
especially recently by raising the minimum wage, does, in fact, 
do that. We also in addition to compensation--
    Ms. Porter. You raised the wage only in high-cost areas, 
however, not across-the-board.
    Mr. Scharf. Excuse me?
    Ms. Porter. You raised the wage only in high-cost areas, 
not across-the-board.
    Mr. Scharf. We raised our wages in four different tiers.
    Ms. Porter. With that, I yield back.
    Chairwoman Waters. The gentleman from Illinois, Mr. Casten, 
is recognized for 5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman. And thank you, Mr. 
Scharf, for the long day here. I want to shift a little bit to 
some of the recent market activity specifically in the oil 
sector, and I am an energy guy by history. I don't want to make 
too much of one-day volatility, but certainly the fact is clear 
after yesterday's news that Russian and Saudi interests are not 
aligned with our own, and we need to brace ourselves for a 
potential downturn. As I am sure you know, in the 2016 period, 
Wells Fargo, your energy fund was exposed to significant losses 
because of the Cubic Energy bankruptcy. And what I would like 
to understand is how much capital exposure does Wells Fargo 
currently have exposed to the oil and gas sector?
    Mr. Scharf. Congressman, I don't have that number sitting 
right here. The last time I looked, I looked at our exposure as 
a percentage of our total loan exposure, as well as our 
percentage of equity, and it looks similar to what the other 
larger banks have.
    Mr. Casten. Okay. And you tell me if this is right. If 
there is exposure, would it all be in the, I guess you now call 
it the Wells Fargo Energy Group? Is that where all the energy 
lending would take place?
    Mr. Scharf. I am not sure, Congressman.
    Mr. Casten. Okay. This is from your website. It is an 
October 2018 report, so I don't know if it is right, but it 
says that you have $42 billion committed to public and private 
companies across the upstream, midstream, and downstream 
services. And if I am just looking at this, it says 41 percent 
in exploration and production, 15 in midstream. If I think 
exploration production pipelines, that is perhaps $23 billion 
of exposure to this space. Does that feel about right to you? 
And I am trying to do the math in my head. I am not trying to 
put you on the spot.
    Mr. Scharf. I will take your word for it, if you have the 
document, Congressman.
    Mr. Casten. Okay. Do you have any sense of how much of that 
is in equity versus debt?
    Mr. Scharf. No, I don't, Congressman.
    Mr. Casten. Okay. And, again, I am just trying to do the 
math. In your most recent 10-K, it said that your total loan 
portfolio for oil, gas, and pipeline was $13.56 billion. I am 
assuming that is just the debt side. So is it a reasonable 
guess that there is maybe $10 billion in equity, ballpark?
    Mr. Scharf. Congressman, I don't know the specifics sitting 
here today.
    Mr. Casten. Okay. Can you estimate on the debt side how 
much would be second lien versus senior debt?
    Mr. Scharf. No, I can't sitting here today, Congressman.
    Mr. Casten. Okay. Well, I suspect we are going to have a 
lot of you don't knows, but if you could get back to us on all 
these. Do you know how far the oil price would have to fall for 
your senior loans to be in technical default, just on an asset-
to-value test?
    Mr. Scharf. Congressman, we have a risk function and a 
business function that I am sure has run models like that 
specific question that I don't have the answer to.
    Mr. Casten. Okay. I won't hold you to this. Do you have any 
general sense, given the oil market volatility right now, how 
concerned your risk function is about that oil market 
volatility?
    Mr. Scharf. Congressman, there is certainly a heightened 
degree of activity around the oil and gas exposures that we 
have. We took those exposures, we took them in the context of 
what we thought the risk we could tolerate, and so beyond that, 
I can't answer additional questions on it.
    Mr. Casten. Okay. Well, do you think your exposure is sort 
of representative of the industry, the broader banking 
industry?
    Mr. Scharf. Again, I can't speak for the rest of the 
industry, and I don't know the specifics of their exposures.
    Mr. Casten. Do you have any idea how much you have reserved 
for potential losses in the sector?
    Mr. Scharf. I don't sitting here today, and I am not sure 
it is something I would want to share broadly anyway.
    Mr. Casten. Okay. Well, I will follow up, so if you could 
get answers back to me in writing, I would appreciate it.
    What I am trying to understand is what is this systemic 
risk created to the entire banking sector, of which you are a 
participant, if there is a sustained reduction in the value on 
the books of the oil companies in this country. When Cubic 
Energy went bankrupt, Jon Ross, and, again, where you took a 
complete wipeout on the equity, John Ross, their vice president 
of operations, said, ``What is really worth anything at $40 oil 
and $2 gas? It is hard for me to say right now.'' Now, the 
answer for the equity holders, including Wells Fargo, was zero.
    As of today, West Texas crude is at $34, and natural gas, 
Henry Hub, is at $1.90. It is a concern for me that you don't 
know. I realize this is just recent news, but if you could get 
back to us with some sense of what the exposure is, and how 
concerned we should be about broader market exposure in the 
banking sector, I would appreciate it.
    Mr. Scharf. Congressman, I can assure you that it is a 
topic of conversation inside the company.
    Mr. Casten. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Colorado, Mr. 
Perlmutter, is recognized for 5 minutes.
    Mr. Perlmutter. It's good to see you, Mr. Scharf. I have 
sort of three questions, two that kind of follow along Ms. 
Porter's questions and then Mr. Casten's questions, and one 
more general question about the company. A wise man once told 
me that problems don't age very well, and this GAP insurance, 
the guaranteed asset protection, where Wells Fargo has received 
a premium to cover the loss of a car, then the car is either 
sold and Wells Fargo is paid off, or they refinance it, the car 
is paid off, Wells continues to hold that full premium, and 
there are cases out there brought against the company to 
recover that. They are small-dollar amounts, and as somebody 
who has been outside counsel to financial institutions, your 
outside lawyers are going to say, we can fight this, we can 
require arbitration, we can make everybody come in to get their 
$322. And you know what? We will be better off as an 
institution. But I would remind you of this by saying problems 
don't age very well, and as chief executive officer, I would 
just ask that you consider Ms. Porter's discussion and also 
that pleading, and take a look at just getting it settled, 
because these things need to get behind the bank, which brings 
me to sort of my second point.
    I think the thing that really has been difficult for both 
the Democrats and Republicans is just the series of consent 
orders, the delay from the first one to today. And, the 
question, I think, both reports to different magnitudes, is 
there was an issue with management, issue with the boards, 
issue with the regulators. And I think for us, the question is, 
were the board of directors derelict in their duty, or is the 
culture of the company such that it is difficult to get your 
arms around it, or is this company too big to manage? And I 
would just like to get your response to that.
    Mr. Scharf. Thank you, Congressman. I think it is 
absolutely possible to run a company like Wells Fargo well, and 
there is a series of things that we haven't done to categorize 
itself as running well, and that is evident in our lack of 
ability to make progress in some of these activities that we 
have spoken about today. Our culture did work against us. It is 
not what it needs to be. We haven't had the right management 
structure of the company in place, we haven't had the right 
people in place, and we certainly didn't have the right 
priority set across the company. And then, I have also spoken 
today about the fact that we didn't have the right 
accountability for people then to be able to map what those 
priorities were and what it meant for them. I think when you 
put those things together, and you get the right people in the 
right seats, and you run the company very differently, it is 
possible to have a very different outcome than we have seen.
    Mr. Perlmutter. Okay. The last one is, well, and the proof 
will be in the pudding. Further delays are only going to be 
problems that continue to age and are not good for the company. 
I have been a customer of the bank for 40 years, and I have had 
some of those issues in my own accounts, so I want to see the 
company right its ship and just do good.
    The last thing is the softball I want to give you, and that 
is, if you were sitting up here, and you have coronavirus, and 
you see small businesses as potential victims of a recession--
the tourism industry, hospitality--and then you couple that 
with this fight between Russia and Saudi Arabia on oil, if you 
were sitting up here as a Member of Congress on the Financial 
Services Committee thinking that a recession is a potential, 
what should we be looking for in the financial sector generally 
to help stem off something that would get worse?
    Mr. Scharf. Congressman, I would certainly look and ask the 
question, what are the banks doing in order to do what they can 
to support all of the individuals who are affected by this? We 
don't know how far it will go, but we know that it is 
significant, and we know that there are things that we can do 
to help the individuals, both at our own companies, the 
consumers who are our clients, but also the impacted consumers 
of the corporations that we do business with.
    Mr. Perlmutter. And sort of a last point, those who could 
be really affected--some things were done by your bank during 
our shutdown. I would ask that you consider doing some similar 
things to help those affected individuals. Thank you.
    Chairwoman Waters. Thank you. The gentlewoman from 
Michigan, Ms. Tlaib, is recognized for 5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman. First of all, I do 
think it is important that many folks understand that I think 
what our chairwoman is trying to do is not called intimidation. 
It is called doing her job. This report alone is doing her job 
as chairwoman of Financial Services and as somebody who 
epecially oversees actions by banks like yours, that many 
people are calling it a cultural issue, right? It is called 
cheating. The definition of ``cheating'' is to act dishonestly 
or unfairly in order to gain an advantage. I don't understand 
why we are calling it culture when it is a criminal scheme.
    Page 13 of the report alone, what you did to servicemembers 
in our country who were facing evictions is a loan, something 
that to me is just a criminal scheme that you all got away 
with. And understandably, my colleagues will try to be a little 
bit more forgiving, but when somebody in my community, a 
resident, defrauds the government, they actually go to jail. 
They get prosecuted. So, I am really taken aback by folks who 
don't understand the consumer abuse by the company and 
dismissing it, and kind of belittling it as a cultural issue. 
It is not. It is a criminal scheme. You all got caught doing 
something that was extremely disgusting, and that disadvantaged 
so many of our folks, especially front-line communities like 
mine.
    Your predecessor at Wells Fargo made about $18.4 million in 
2018. Did you know that?
    Mr. Scharf. I have read that, yes.
    Ms. Tlaib. Yes. You do know that is 283 times more than the 
median income for your employees?
    Mr. Scharf. Yes.
    Ms. Tlaib. So my question to you is, do you think it is 
appropriate for a bank caught cheating to not address the 
excessive executive pay at Wells Fargo, at the bank you now 
oversee?
    Mr. Scharf. Congresswoman, I am focused on making sure that 
we treat everyone fairly going forward.
    Ms. Tlaib. Yes, let's talk about that. Do you know that 
when you don't pay a living wage to our residents, many of whom 
are your employees, that they end up going on assistance? So, 
we have to cover health coverage maybe that you all don't 
provide, adequate health coverage, or they have to get a second 
job. And that is something you should absolutely write down, 
Mr. Scharf, and find out what is actually happening in the 
lives of the people who serve in your company.
    One of the things that I have been trying to figure out is, 
is there an amount of CEO pay that you would consider 
inappropriate? So yes or no, would you recommend that you or 
any other bank executives should have to forfeit some of your 
own compensation to pay any penalties Wells Fargo faces under 
your leadership?
    Mr. Scharf. Congresswoman, I think all of the activities 
that occur should be factored into the CEO's compensation.
    Ms. Tlaib. How many CEOs has Wells had since all this 
began? I am looking at the dates here. It has been 10 years, 
and people are trying to say this is an issue with our 
chairwoman. That is 10 years of doing this to real people who 
lost their homes, lost their lives. This stuff is probably 
still on their credit report while you still settle out of 
court and get away with it.
    I have a CEO tax bill, and it is really important--I 
encourage my colleagues to look at this, because I think it is 
critically important--the Tax Excessive CEO Pay Act that I co-
lead with Representative Lee and Senator Sanders. This bill 
would actually put a penalty on all banks and corporations with 
big gaps between CEO and worker pay. It is important that we 
give banks and corporations incentives to end practices that 
put all of us at risk. I say this to you all because I am 
really tired of subsidizing, I mean, literally subsidizing for 
you all not even paying a living wage to the residents who work 
for the company, and, on top of that, you are actually also 
around the corner scamming them.
    And I am not convinced, and it is no fault of your own, Mr. 
Scharf, or maybe it is because you chose this role, coming here 
and continually saying, ``That was before my time.'' If I went 
to my community in 13 District strong and said to them, ``I 
just got here, I don't know,'' they would literally just push 
and hold me accountable and say, ``You need to know.'' So we 
are telling you, you come before this committee, you should 
have been much more prepared and acknowledging and owning what 
this company has done before, because that is not changing 
culture when you don't even acknowledge that that is exactly 
what you inherited, is a criminal scheme by your company that 
is literally leaving people on the streets.
    And this is not personal, Mr. Scharf. This is literally, 
like, life and death for our residents at home. So when you 
come here and you don't have answers, then it is really a 
disgrace, and, honestly, it is disrespectful to this chamber. 
You cannot come here and continue to say, ``I am new.'' That is 
not the right answer. It should be--
    Mr. Scharf. Congresswoman, I am sorry you feel that way. I 
think I have provided many answers about what I am doing.
    Ms. Tlaib. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentlewoman from Ohio, Mrs. Beatty, 
who is also the Chair of our Subcommittee on Diversity and 
Inclusion, is recognized for 5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman. And thank you to 
the witness. I am interested in how you plan to run the bank. 
So, first, let me start with, did you know what you inherited 
when you took this job? And mine are going to be yes-or-no 
questions to move us along. You have had a long day. But did 
you know? Do you think you were adequately prepared to know 
what you were inheriting? Yes or no?
    Mr. Scharf. I was--
    Mrs. Beatty. Yes or no?
    Mr. Scharf. I was as prepared as I could be. It is not--
    Mrs. Beatty. So, is that a yes? You were adequately 
prepared. Is that a yes?
    Mr. Scharf. I was as prepared as I could--
    Mrs. Beatty. Okay. So, that is a no. Can you tell me if you 
think you were adequately prepared for this hearing today? Yes 
or no, please, and it is for the sake of time. I have waited a 
long time.
    Mr. Scharf. I have done the best that I can for the 4 
months I have been there.
    Mrs. Beatty. So were you adequately prepared by your team 
for this hearing? Yes or no?
    Mr. Scharf. Congresswoman, that is for others to determine.
    Mrs. Beatty. No, I am asking you. You are sitting in the 
chair. You are our witness. Do you think you were adequately 
prepared? And this is not a ``gotcha'' question.
    Mr. Scharf. I believe I was--
    Mrs. Beatty. Okay. So, then you--
    Mr. Scharf. --but I think that is for others to determine.
    Mrs. Beatty. Then, let me ask it this way. What do you 
believe? Do you believe you were adequately prepared?
    Mr. Scharf. Yes, I do.
    Mrs. Beatty. Thank you. Now, are you familiar with the 
interests of the subcommittee Chairs on this committee? Do you 
know what subcommittee I Chair?
    Mr. Scharf. You Chair the Diversity Subcommittee.
    Mrs. Beatty. Okay. So, see, that is a thank you. It appears 
that you were adequately prepared to know what I Chair. Did you 
read the Wells Fargo report that was submitted to my 
subcommittee?
    Mr. Scharf. No, I did not, Congresswoman.
    Mrs. Beatty. That is disappointing, and I am very serious, 
so now I can answer the question. You were not adequately 
prepared. For you to come here and say to me one of the biggest 
things that we are doing is moving this needle, then you want 
to understand why people ask you questions, because when we 
talk about moving the needle for inclusion, we are also looking 
at closing the wealth gap. We are looking at pay equity. It is 
far beyond race and ethnicity and gender. It is about rural 
people. It is about veterans. It is about how we move the 
needle to make sure that people have equality and not 
injustices. I am very sad because you can't answer half of the 
rest of my questions since you didn't even take the time to 
look at the report.
    I have been very consistent. I have asked the same 
questions for the last 6 years to every CEO who has been in his 
room. This is my life mission, to make sure that women and 
minorities, and, specifically for me, African Americans, stand 
a fair chance in the world that you operate in and in the world 
that you run. So from the transcript, when they talked about 
hiring you, I don't know if you will remember this, but let me 
quote. It said that you were passionate about diversity and 
inclusion, and that you were committed to work with a talented 
management pool of people, and then you answered and said you 
were excited to come on board to do those things. See how I am 
connecting the dots? If they thought you were passionate and 
committed to diversity--
    Mr. Scharf. I am, Congresswoman.
    Mrs. Beatty. --and inclusion, and yet you don't read or 
look at the DNI report, and you knew you were coming before 
this committee, and I have asked every single person the same 
question. So, let me ask you this. Can you give me a commitment 
as you are talking about cleaning the house, bringing on new 
people, do you or will you have a diversity and inclusion 
executive on your team? Yes or no?
    Mr. Scharf. Yes.
    Mrs. Beatty. Do you have one?
    Mr. Scharf. Yes, we do.
    Mrs. Beatty. Does that person report to you?
    Mr. Scharf. No, she does not.
    Mrs. Beatty. Wrong answer. If you really believe in 
diversity and inclusion, that person, especially with all the 
inequities that you have in the lack of addressing the 
questions that my colleagues have asked, you should look at 
that person reporting to you. Now, you have a seat on the 
board. I get the point that you don't serve on the nominating 
committee. So the question to you is, will you push for 
something like the Rooney Rule, sitting there as a board 
member, or do you even know what the Rooney Rule is? Have you 
heard of it?
    Mr. Scharf. I do, and--
    Mrs. Beatty. So then, you know the Rooney Rule. I have a 
piece of legislation, thanks to our chairwoman, called the 
Beatty Rule that was put into legislation and actually passed. 
Will you participate in doing that? Yes or no?
    Mr. Scharf. I can certainly have the conversation. I would 
be supportive of it, but it is the board's decision.
    Mrs. Beatty. How many people of color and women and other 
diverse people are on the board?
    Mr. Scharf. Thirty percent are women and 20 percent are 
diverse.
    Mrs. Beatty. Sorry. My time is up, and I yield back.
    Chairwoman Waters. Thank you very much. Before we adjourn 
the hearing, I yield 4 minutes to the gentleman from North 
Carolina to close.
    Mr. McHenry. Thank you for your testimony today, Mr. 
Scharf. First, I think we have to say that you have outlined an 
aggressive plan for the institution that is needed. You will be 
held accountable by your regulator. You will be held 
accountable by your board. You will be held accountable by your 
shareholders, and you are certainly going to be held 
accountable by those who make the law here on Capitol Hill and 
have oversight over those regulators.
    What is clear is in the history of your institution, wrong 
was committed, but this hearing today was about the forward-
looking nature of this. So I want to be clear about the 
legislative side of this and how we got here today. There have 
been five reports issued by this committee, three by 
Republicans, and two by Democrats. Now, we had access to the 
same information from the Majority and Minority. After the 
Wells Fargo sales practice scandal came to light in 2016, the 
committee's Republican chairman opened an investigation. That 
was Jeb Hensarling, when the Republicans were in charge of the 
House. He called the CEO to testify and requested documents and 
information from your company and the company's regulators.
    All told, Mr. Hensarling obtained about 170,000 pages of 
documents from your institution and from regulators. He had to 
issue subpoenas to get some of those documents. He had to issue 
subpoenas to get documents from our regulators that we have 
oversight over, and that was during the Obama Administration. 
So, Democrats were in those jobs, but it had to be a Republican 
subpoena to get that information. But both the Majority and the 
Minority at the time get those same documents, so we have that 
same sort of insight into this process. At the time, the 
Democrat Minority issued a report. Republicans issued two 
reports during that last Congress.
    Fast forward to 2019, and Democrats are now in charge of 
the House of Representatives. The changeover is at the 
regulators as well. We had a request for additional information 
from Wells and the regulators, and another 370,000 pages were 
turned over without a single subpoena from your institution or 
from regulators. Now, the key difference is that every single 
one of those pages came without a subpoena from the regulators. 
That was different under the Trump Administration than it was, 
for instance, under Richard Cordray and the CFPB where we had 
to subpoena those documents. Now, this CFPB and this Director 
freely handed those documents over, necessary documents for us 
to have oversight over your institution, and ensuring that our 
laws are appropriate and the enforcement is appropriate.
    So between us, we obtained about a half a million pages of 
documents that both the Democrats and Republicans on this 
committee have. We have key findings of fact that are a real 
indictment for your institution, Wells Fargo, an absolute 
indictment for your institution. Key findings of fact of 
wrongdoing, breaking laws, not adhering to regulation, failing 
to comply with consent decrees, failing to comply with what the 
institution pledged. So, we agree on those facts.
    Now, we come to two different conclusions about how to deal 
with your institution and institutions of your size, and that 
becomes a decision for policymakers to make on what to do about 
those key findings of facts. And we have a disagreement, and 
that is an honest disagreement between Republicans and 
Democrats, but the key findings of facts were bipartisan in 
nature. So, we know that. Now, it is a question of what to do 
with it. I think we need to have strong oversight of you. You 
need to have better management practices and adhere to existing 
law, and we can continue to go along with the current law and 
legal structures that we have for institutions of your size. 
With that, I yield back the balance of my time.
    Chairwoman Waters. Thank you very much. Before we conclude 
today's hearing, I yield myself 4 minutes to describe the 
process the Majority undertook to conduct our Wells Fargo 
investigation and create the report with those findings.
    Over a year ago, at my direction, the Majority staff 
initiated an investigation into Wells Fargo's compliance with 
five consent orders. Majority committee staff requested and 
reviewed about 330,000 pages of records in the course of the 
investigation. Majority committee staff also received briefings 
from the Federal Reserve, the OCC, the CFPB, the SEC, and Wells 
Fargo, and conducted interviews with key executives at Wells 
Fargo, and the former Chair of the board's risk committee. In 
addition, they interviewed officials at the Federal Reserve, 
the OCC, and the CFPB.
    The documents which served as the basis for the Majority 
staff report, and which the Minority also used for their 
report, were obtained because the Majority staff spent months 
working to obtain them from regulators and the bank. The 
regulators and the bank did not offer these documents up on 
their own, but instead only provided them to us after months 
and months of intense and productive negotiation. The Majority 
staff determined the focus of this investigation, drafted the 
document request to the OCC, the CFPB, and the Federal Reserve, 
Wells Fargo Bank and Wells Fargo's board of directors, and 
determined the scope of those inquiries. The Majority staff 
selected the witnesses the committee interviewed, and 
negotiated their appearances for interviews. At the same time, 
Republicans had access to all of the documents and had the 
opportunity to participate in all formal interviews.
    I would like to publicly acknowledge the work of the 
following key Majority staff members, without whose year-long 
effort, this report would not have been possible: Bruce 
Johnson, deputy chief oversight counsel; Carolyn Hahn, senior 
counsel; Kevin Burris, chief oversight counsel; Christine 
Baltazar, paralegal; Glen Sears, director of consumer 
protection policy; Avy Mallik, senior counsel; Yana Miles, 
senior counsel; Pierre Whatley, professional staff member: Eric 
Hersey, communications director; Erica Loewe, deputy 
communications director; Marcos Manosalvas, digital director; 
and Eden Harris, press assistant.
    The Majority's investigation revealed deeply-troubling 
failures on the part of the bank's board management and 
regulators, and shows that the bank is still broken and 
continues to harm consumers. It also made clear that Congress 
needs to act to ensure that a megabank can never again escape 
accountability to the public or responsibility of harm to 
consumers. At this hearing, we have made it clear to Mr. Scharf 
that this committee is keeping a close eye on Wells Fargo, and 
we will be holding them accountable for ending the bank's 
egregious pattern of consumer abuse. He has an immense task 
ahead of him, and the committee will not relent in its scrutiny 
of the bank until its appalling practices end for good, and 
megabanks understand that they are not above the law.
    No matter what is being said about who did what and when, I 
am in charge of this committee. I have the gavel, and we have 
put together this report. We are going to follow up with it. 
And all of the information, incorrect information, that has 
been shared today about who is responsible for what, we are 
responsible for this report. We stand by it. So, I would like 
to thank our witness for his testimony today.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    The hearing is now adjourned. Thank you.
    [Whereupon, at 2:00 p.m., the hearing was adjourned.]

                            A P P E N D I X


                             March 10, 2020
                            
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