Mar 10, 2020 - Economy & Business

Wells Fargo CEO pitches new beginning for the bank

Wells Fargo CEO Charlie Scharf. Photo: Win McNamee/Getty Images

Charlie Scharf is the third CEO in three years to try to wrangle Wells Fargo out of the bad graces of regulators, lawmakers and consumers.

The big picture: Wells Fargo is facing bipartisan anger over its fake accounts scandal. Scharf spent four hours in front of Congress on Tuesday pitching a new vision of the bank, with the worst behind it.

What they're saying: "We have not yet re-earned the trust we would like the Wells Fargo name to represent," Scharf told the House Financial Services Committee on Tuesday — an acknowledgement of ongoing mismanagement after a snowball of customer abuse scandals.

  • Scharf, less than five months into the job, pinned the bank's troubles on his predecessors. "Our structure was problematic, and the company’s leadership failed its stakeholders," he said.
  • Scharf added that he believed Wells Fargo could recoup its tarnished reputation under his leadership.

The big picture: His testimony came after Democrats released a report last week — with previously unseen emails — that showed Wells Fargo executives were lax in complying with regulators' demands.

  • Two board members mentioned in the report, Betsy Duke and James Quigley, resigned abruptly on Sunday, days before they were due to testify in front of the same committee as Scharf.

Ahead of this week's hearings, Wells Fargo attempted to get in front of a number of top complaints about big banks, like low worker pay and high overdraft fees.

But those moves did little to assuage lawmakers — Democrats in particular — who expressed concern about the lasting impact of Wells Fargo's misdeeds.

  • "It is clear to this committee that the bank you inherited is a lawless organization that has caused widespread harm to millions of consumers throughout the nation," Rep. Maxine Waters (D-Calif.), who chairs the House Financial Services committee, told Scharf.

Between the lines: Wells Fargo got flak from both sides of the aisle. But there was a split between Republicans — who said the bank's problems were unique — and Democrats, who worried its troubles were symptomatic of broader issues in the banking sector.

  • Wells Fargo "was grossly mismanaged" and its misdeeds don't "tell us much about Wells Fargo's large bank peers," Rep. Patrick McHenry (R-N.C.) said.

The intrigue: The Consumer Financial Protection Bureau filed a suit Monday against Fifth Third Bank, saying that employees at the Cincinnati-based regional bank opened unauthorized accounts and lines of credit in order to meet sales goals.

The bottom line: Scharf isn't new to the banking industry — he's held the top job at Visa and BNY Mellon, and senior positions at J.P. Morgan — but he is new to Wells Fargo, unlike his predecessors. He was thus able to duck much of the anger and pin it on prior leaders.

  • That won't be the case on Wednesday, when Duke and Quigley — who have sat on the board since before 2016 — appear before Congress.

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Two Wells Fargo board members resign

Elizabeth Duke, shown in Senate testimony in 2008. Photo by Joshua Roberts/Getty Images

The chair of Wells Fargo's board of directors, Elizabeth Duke, resigned under pressure Sunday, days before she was scheduled to testify on Capitol Hill about the bank's fake accounts scandal — as did a second board member, James Quigley, who was also going to be grilled by lawmakers.

Why it matters: Wells Fargo is attempting to close the chapter on the systemic frauds that were exposed in 2016, when 5,200 employees were fired over 2 million fake accounts that were created. Evidence shows the bank did not satisfactorily clean up its act in the ensuing years, leaving Democratic lawmakers furious.

The banking industry's fake account scheme may have been widespread

Photo: Robert Alexander/Getty Images

The latest bank in the crosshairs of the Consumer Financial Protection Bureau is Fifth Third Bancorp, which disclosed in a securities filing this week that the CFPB is targeting the bank for “alleged unauthorized account openings,” American Banker's Kate Berry reported.

Why it matters: Wells Fargo has faced billions in fines and penalties and had been held up as a singular example of corporate wrongdoing for its account fraud scandal, but the disclosure of the complaint against Fifth Third could mean that there are one or many other shoes to drop.

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Adapted from Federal Reserve Bank of Dallas; Chart: Axios Visuals

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