Spotlight: Wells Fargo CEO denies bank "too big to manage" in congressional hearing

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WASHINGTON, March 12 (Xinhua) -- Wells Fargo President and CEO Timothy Sloan denied claims that the U.S. fourth largest bank is "too big to manage," as lawmakers excoriated him in a congressional hearing Tuesday for failing to address a series of customer-related scandals that have engulfed the lender.

Reading a prepared testimony before the House Financial Services Committee, Sloan said the bank has worked to address "root causes" of its problems. "As a result, Wells Fargo is a better bank than it was three years ago."

The embattled bank has come under strict scrutiny by federal and state regulators after revelations in 2016 -- and subsequent regulatory probes -- uncovered that the bank's employees cheated clients by issuing as many as 3.5 million unauthorized accounts in order to meet sales goals, among other consumer abuses.

Sloan's remarks, however, did little to convince the lawmakers, who remained doubtful about any significant progress Wells Fargo has made to correct its mishandlings.

"Given the unprecedented nature of the Federal Reserve's growth restriction, which remains in place today, is Wells Fargo simply too big to manage?" Maxine Waters, chairwoman of the committee, asked Sloan. She was referring to the Federal Reserve Board's (FRB) imposition of growth cap on Wells Fargo in February 2018.

"No, we are not," Sloan replied, adding that the lender has made changes including "fundamentally reorganizing the company, centralizing our risk and control functions."

"On and on and on, with all of this experience and the length of time that you have been there, the role that you have played, you've not been able to keep Wells Fargo out of trouble," said Waters, a Democratic representative from the state of California.

"Why should Wells Fargo continue to be the size that it is? And should it be downsized? Or, what else could be done?" Waters asked.

In response, Sloan said he believes Wells Fargo serves its 70 million customers, or one out of three U.S. households, "in a very effective way," which, he added, "is reflective of the changes that I've made since I've become CEO."

According to Sloan's prepared opening statement, Wells Fargo has added more than 3,000 new risk professionals, giving the company "better visibility into issues as they emerge" and enabling it to "respond to them more quickly."

"We have reevaluated our products and services, shed riskier investments, and sold or discontinued non-core businesses and activities," the CEO said.

He also told members of the committee that the bank has hired many people from outside the company to oversee its risk control, legal, human resources, technology and auditing practices.

Waters said all the changes that Sloan has made "are not evident." "And you do not have the kind of customer satisfaction you are alluding to."

Concerning the 3.5 million fraudulent bank accounts, Sloan said his company "looked back more than 15 years, reviewed 165 million accounts, contacted more than 40 million customers -- both individuals and small businesses -- via 246 million individual communications, and have provided millions of dollars in compensation to our customers to date."

"We've reached out to those customers, and my guess is that once we completed that remediation, the number will be smaller," Sloan said, responding to a query by Patrick McHenry, Republican representative from the state of North Carolina and ranking member of the committee.

Despite the remediation efforts cited by Sloan, Wells Fargo employees, according to a New York Times report on Saturday, "remain under heavy pressure to squeeze extra money out of the customers."

"Each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn't happen again," McHenry said. "But a few months later, we hear about another case of dishonest sales practices or gross mismanagement."

The committee's top Republican asked Sloan to pledge his commitment that he "will do what is necessary to make sure this won't happen again," while questioning him on the likelihood that Wells Fargo's customers "are going to hear more of bad actions" taken by the company.

"I can't control the media," Sloan replied, adding that "the changes that we've implemented since I've become CEO are going to prevent them from occurring as best as we can."

The FRB found that Wells Fargo "had pursued a business strategy that prioritized growth over risk management," according to a memorandum the committee provided for Tuesday's hearing.

The memorandum also cited a December 2018 report by Reuters as saying the FRB rejected the bank's written plans to improve its governance and risk management process because they failed to include sufficient checks on the company's management.

According to Sloan, Wells Fargo has entered into altogether 14 consent decrees so far, and paid millions of dollars in fines as required by regulators including the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC) and the U.S. Securities and Exchange Commission (SEC).

In addition to opening fake debit and credit accounts, which the bank admitted resulted in customers paying approximately 6.1 million dollars in erroneous banking fees, the lender also paid 1 billion dollars in fines to the CFPB and OCC in April 2018 to resolve allegations that it charged home mortgage borrowers too much in fees and compelled customers to pay "force-placed insurance" for their vehicles.

Furthermore, the SEC found that from at least January 2009 to June 2013, representatives of Wells Fargo Advisors LLC (WFA) -- a subsidiary of the Wells Fargo -- improperly engaged in the sale of complex financial products to retail investors.

That strategy, according to the memorandum, reduced customers' investment returns while generating substantial fees for WFA. Enditem

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