Dive Brief:
- Sen. Sherrod Brown, D-OH, called out Wells Fargo over reports of racial disparities in mortgage lending, fake job interviews for nonwhite and female candidates and anti-money laundering concerns in a letter Tuesday to the bank’s CEO, Charlie Scharf.
- “These recent problems add to the laundry list of consumer abuses and compliance breakdowns that led to the imposition of a growth restriction on [Wells Fargo] in 2018,” Brown, the Senate Banking Committee's chair, wrote to Scharf. “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.”
- Brown noted he looked forward to hearing Scharf's feedback in testimony at the yet-unscheduled 2022 Wall Street oversight hearing.
Dive Insight:
During his first earnings call as Wells Fargo's CEO in January 2020, Scharf prioritized righting the bank’s regulatory woes "with a different sense of urgency and resolve." The bank had 12 enforcement actions against it at the time — and has since winnowed that to nine. But as recently as January, Scharf stressed that Wells' recovery would be a "multiyear effort."
Amid that, he has led an effort, since at least 2020, to review the bank’s business model, cutting units that are seen as “non-core.”
Brown noted in his letter Tuesday that Wells Fargo "made $21.5 billion in 2021 and announced a plan to double dividends" and buy back stock, despite its "failures" — and spotlighted Scharf's $24.5 million annual salary (and 20% raise from 2020).
The bad press for Wells has continued this year.
In March, Bloomberg reported that the bank rejected more than half of Black applicants looking to refinance their mortgages. In contrast, JPMorgan Chase and Bank of America accepted 81% and 66% of refinancing applications from Black homeowners, respectively.
The following week, Brown and several other Democratic senators sent a letter to the Housing and Urban Development Secretary Marcia Fudge and Consumer Financial Protection Bureau Director Rohit Chopra, asking the officials to review Wells Fargo’s mortgage refinance lending with an eye toward compliance with the Equal Credit Opportunity Act and the Fair Housing Act.
In May, The New York Times reported Wells Fargo held phony job interviews for nonwhite and female job-seekers, often for positions that had already been offered to other candidates.
The Securities and and Exchange Commission last month slapped Wells Fargo with a $7 million fine over anti-money laundering violations.
Taken together, “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,” Brown said in Tuesday's letter.
That growth restriction comes in the form of a $1.95 trillion asset cap the Federal Reserve imposed on the bank in the wake of its 2016 fake-accounts scandal.
"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," Brown wrote Tuesday.
