Sen. Warren to Wells Fargo CEO: ‘You should be fired’

Sen. Elizabeth Warren, a fierce banking industry critic, said Wells Fargo CEO Tim Sloan “should be fired” during a two-hour congressional hearing Tuesday, saying the bank veteran did not react fast enough to a massive sales scandal.

“Wells Fargo is not going to change with you in charge,” said Warren, a Democrat from Massachusetts who also called for the firing of Sloan’s predecessor, John Stumpf, a year ago.

The San-Francisco-based bank agreed in September 2016 to pay $185 million in fines to settle authorities’ claims employees opened accounts without customer knowledge as they pushed to meet high-pressure sales goals. That came three years after a Los Angeles Times report first exposed a “pressure-cooker” sales culture that had existed at the bank for years.

Responding to Warren’s takedown, Sloan highlighted steps by the bank’s board to oust responsible executives and to reclaim stock grants. He acknowledged that he had made mistakes, including not acting fast enough after problems came to the attention of top bank leaders in late 2012. But he repeatedly emphasized Wells has made fundamental changes in the past year.

“I’m not afraid to make hard decisions when it’s needed,” said Sloan, wearing a red Wells Fargo pin prominently on his lapel. “And I have the support of 270,000 (employees). That’s why I think I’m the right person.”

In a later exchange with Warren, Sloan refused to say the bank would not lay off employees as part of cost-cutting plans announced since the scandal. The senator said it’s usually front-line workers, not executives, who pay the price for corporate scandals. But Sloan fired back, saying the company’s employees are his top priority and that Warren was trying to “unfairly scare” workers.

In his opening remarks, Sloan, who replaced Stumpf last October, apologized for the bank’s fake accounts scandal and outlined reforms the company has taken over the past year. “If there is a problem, we want to hear about it,” he said.

U.S. Sen. Sherrod Brown, D-Ohio, however, said the bank hasn’t done enough to fix a “corporate culture that is willing to abuse its customers and employees in an effort to pad its numbers and increase executive compensation.”

Noting a recent data breach at credit reporting company Equifax that compromised personal information of millions of customers, Brown, the committee’s top Democrat, added: “It is no wonder the public doesn’t trust our financial system.”

Brown and other senators also criticized Wells Fargo for requiring customers to use arbitration to handle customer disputes, saying customers should be “given their day in court” if needed.

Sloan defended the use of arbitration, saying the bank pays for a mediator to work on behalf of customers to resolve complaints.

The arbitration question is part of a broader dispute over whether credit card companies and banks can require customers to use arbitration to settle disputes, instead of the courts.

In July, the Consumer Financial Protection Bureau moved to ban most types of mandatory arbitration clauses. But the Republican-controlled House has voted to overturn that rule, sending the issue to the Senate next.

At Tuesday’s hearing, Sen. Tom Cotton, R-Ark., said he doesn’t think consumers should be forced to sue banks in court to settle disputes, which he said would be the effect of the CFPB rule.

Will Sloan appease critics?

The Wells Fargo CEO appeared on Capitol Hill a little more a year after his predecessor received poor reviews for how he handled pointed questions from lawmakers about the scandal following the $185 million settlement. He retired weeks later.

The nation’s No. 3 bank by assets, which has more than 24,000 employees in Charlotte, has repeatedly apologized for the scandal and pointed to changes it’s made as it seeks to improve its practices.

In his five-page testimony, Sloan described the past year as having been “a time of great disappointment and transition” at Wells. He faulted the bank for recognizing “too late the full scope and seriousness of the problems in our community bank.”

“Let me be very clear about this: I am deeply sorry for letting down our customers and team members,” Sloan said in the prepared remarks, adding that Wells Fargo is “a better bank today than it was a year ago and next year Wells Fargo will be a better bank than it is today.”

Ahead of the hearing, one analyst said Sloan’s opening statement would not go far enough to appease lawmakers angry over the scandal.

Jaret Seiberg, with Cowen and Company, said in a report Monday that parts of Sloan’s remarks were expected to go over well, including examples of how Wells has held top executives accountable. But the remarks won’t satisfy Warren and many other Democrats who will use the hearing to demand the ousting of executives or board members in place when fake accounts were being opened, Seiberg wrote.

This story was originally published October 3, 2017 at 1:14 PM with the headline "Sen. Warren to Wells Fargo CEO: ‘You should be fired’."