House Democrats on Tuesday told the new CEO of Wells Fargo that the bank has not paid enough penance for its massive fraud scheme, suggesting they would like to break up the company and influence its investment decisions.
Charles Scharf, who took over the bank in October, spent four hours testifying to the House Financial Services Committee. He is the third Wells Fargo CEO put in the hot seat in Congress since the bank’s practice of opening phony accounts in customers’ names came to light in 2016.
“It’s clear the bank you inherited is a lawless organization that has caused widespread harm to consumers across the nation,” said committee Chairwoman Maxine Waters, California Democrat. “There’s a pattern of harming its customers that seems to persist.”
Ms. Waters’ opening remarks set the tone for the hearing, which saw Democrats hector Mr. Scharf about Wells Fargo’s dividends, business relationship with gun manufacturers, future decisions about acquisitions or expansion, pay scale and diversity hires.
They heaped those questions on top of probing what moves Mr. Scharf has made to comply with an expansive regulatory blueprint drawn up in the aftermath of the scandal.
The title of the hearing was “holding Wells Fargo accountable,” and it became clear that Democratic lawmakers sought to crack down on several fronts.
Rep. Al Green, Texas Democrat, minced few words. He wanted someone behind bars for what Wells Fargo did.
“Commit fraud and not one person goes to jail,” Mr. Green said. “I guess it’s too big to fail, too big to jail apparently, but this can’t be resolved by paying off the government.”
Since the illegal sales maneuvers at Wells Fargo were discovered, the bank has paid some $2.7 billion in fines and settlements, an amount that will grow given that not all the cases have been settled.
Republican committee members tried to keep the meeting focused on Wells Fargo’s proven misdeeds and Mr. Scharf’s plans to transform the corporate culture.
“The committee majority made up its mind about Wells Fargo a long time ago,” said Rep. Patrick McHenry of North Carolina, the top Republican on the committee. “This is the first of three politically motivated, ideological hearing on Wells Fargo.”
Mr. McHenry said the committee next plans to drag former Wells Fargo executives to Capitol Hill to embarrass them and the company. By quoting emails and internal communications from executives no longer with the bank, Democrats hope to increase pressure on it and other big financial institutions to toe the line on an array of issues, according to committee Republicans.
Mr. Scharf said he could not explain what was done right or wrong before his arrival. He repeatedly insisted he has made multiple changes in personnel and redesigned the company’s structure to give executives a clearer picture of what is happening across the bank and the risks being taken.
Wells Fargo was known as a risk-averse company, a reputation that served it well during the 2008 financial crisis but was badly cracked by the 2016 scandal.
“People can trust Wells Fargo to do the right thing,” Mr. Scharf said under questioning from Georgia Democratic Rep. David Scott, who said he was a Wells Fargo customer.
Mr. Scharf came to head Wells Fargo after holding similar positions with VISA and Bank of New York-Mellon. Some of the few moments of levity Tuesday came when Ms. Waters noted Mr. Scharf’s two predecessors had resigned quickly after testifying before the committee and when some committee members wondered why Mr. Scharf had taken the job.
Overhanging the hearing was the question of whether regulators or lawmakers might move to break up Wells Fargo. In his opening statement, Mr. Scharf said he had come to no conclusion about what size the bank would be when his overhaul was fully implemented, but under questioning, he denied the company is too big to be managed properly.
“It’s absolutely possible to run a business as big as Wells Fargo well,” he said. “Our culture did work against us.”
Several Democratic lawmakers insisted it wasn’t enough to blame the company’s culture.
Rep. Rashida Tlaib, Michigan Democrat, told Mr. Scharf they did not find his testimony compelling.
“This is not called intimidation, it’s called doing your job,” Ms. Tlaib said of the Democrats’ far-reaching interrogation. “It’s a criminal scheme and you all got caught, that’s exactly what you inherited.”