WASHINGTON, D.C. – Today, Sen. Sherrod Brown (D-OH), Chair of the
Senate Committee on Banking, Housing, and Urban Affairs, sent a letter to Wells
Fargo CEO Charles Scharf laying out the megabank’s history of consumer abuses
and gross mismanagement. In the letter, Brown urged Wells Fargo to finally
right past wrongs and live up to the promises made to the American people
following their fake accounts scandal.
“Recent revelations of racial disparities in mortgage lending,
fake job interviews for minority and female candidates, and anti-money
laundering violations are troubling as Wells Fargo, unfortunately, continues to
demonstrate its inability to address its longstanding risk management failures.
These recent problems add to the laundry list of consumer abuses and compliance
breakdowns that led to the imposition of a growth restriction on your bank in 2018 until your
firm improves its governance and controls,” wrote Sen. Brown. “Wells
Fargo’s continued inability to manage the basic requirements of serving its
customers means that consumers, investors, and employees continue to pay the
price. It is clear that Wells Fargo still has a long way to go to fix its
governance and risk management before it should be allowed to grow in size. It
is unacceptable that after years of failed attempts, nothing seems to have
improved.”
A
copy of the letter is available
here
and below.
Dear
Mr. Scharf:
Recent
revelations of racial disparities in mortgage lending, fake job interviews for
minority and female candidates, and anti-money laundering violations are
troubling as Wells Fargo, unfortunately, continues to demonstrate its inability
to address its longstanding risk management failures. These recent problems add
to the laundry list of consumer abuses and compliance breakdowns that led to
the imposition of a growth restriction on your bank in 2018 until your firm
improves its governance and controls. Accordingly, I urge you to once and for
all address Wells Fargo’s governance, risk management, and hiring practices –
weaknesses that have plagued the bank for almost a decade.
First,
Wells Fargo has said that it is committed to closing the wealth and income gaps
in this country, but it appears instead that your actions and mismanagement
help continue racial and economic disparities. In March, my colleagues and I
raised concerns about whether Wells’ mortgage refinance lending complied with
fair lending and housing laws. Following our letter, your bank has proposed new
programs to refinance mortgages of minority homeowners whose loans you
currently service and to provide additional grants; however, I remain concerned
that families of color will still – once again – get the short end of the
stick. Today, 30-year fixed mortgage rates are 5.25%, up 2.6% from their low at
the beginning of 2021. While you have committed $150 million to support the
refinance program, it’s difficult to see how that amount could pay for reducing
interest rates to pandemic lows for the tens of thousands of families who were denied
refinancing, let alone make up for the higher payments they’ve made over the
past year or more. Even if borrowers’ mortgage payments were reduced to where
they would have been if they’d received a refinance loan months ago, this would
simply be doing what Wells Fargo should have been doing all along – treating
all borrowers equally, regardless of their skin color.
Concerns
about discrimination have also surfaced with respect to hiring. Last week, The
New York Times reported your bank conducted fake interviews of Black and female
applicants to give the false impression of improving diversity within its
ranks. This is not the first time Wells Fargo employees have raised concerns
about discriminatory treatment. In 2020, Wells Fargo settled a claim with the
Department of Labor for discriminating against over 30,000 Black applicants for
banking, sales, and support positions. In 2017, Wells Fargo settled a lawsuit
brought by Black financial advisers for racial discrimination, paying $36
million to hundreds of aggrieved employees.
Wells
Fargo’s ongoing, failed efforts to combat lending discrimination and increase
diversity within its ranks raise questions about your ability to fix the myriad
internal controls, risk management, and general governance issues that have
been a problem for nearly a decade. Last Friday, the Securities and Exchange
Commission also fined Wells Fargo’s broker-dealer business $7 million for
anti-money laundering violations arising from the failure to properly implement
and test a system designed to prevent suspicious activity related to money
laundering, terrorist financing, and other illegal financial transactions. In
September 2021, the Office of the Comptroller of the Currency fined Wells Fargo
$250 million for failing to pay back wronged customers and take corrective
actions to improve the execution, risk management, and oversight of its lending
loss mitigation program.
Despite
these failures, Wells Fargo made $21.5 billion in 2021 and announced a plan to
double dividends and buyback $18 billion in stock between third quarter 2021
and second quarter 2022. You received $24.5 million
last year in total compensation, which included a 20 percent increase from
2020. As noted in the 2022 Wells Fargo proxy statement, your total annualized
compensation exceeded 290 times the median Wells Fargo employee estimated
annual total compensation of $73,578.
Wells
Fargo’s continued inability to manage the basic requirements of serving its
customers means that consumers, investors, and employees continue to pay the
price. It is clear that Wells Fargo still has a long way to go to fix its
governance and risk management before it should be allowed to grow in size. It
is unacceptable that after years of failed attempts, nothing seems to have
improved. I expect you to have a plan to finally reform the firm’s risk
management, internal controls, and governance structures so that your firm
rights past wrongs and lives up to the many promises that Wells Fargo has made
to its customers and their communities.
Thank
you for your attention to this important matter, which has significant
consequences for your customers and employees, and ensuring a fair and stable
banking system. I look forward to your testimony at our annual Wall Street
oversight hearing.
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