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On Tuesday, new CEO of Wells Fargo Tim Sloan took the stand at a hearing in front of the U.S. Senate Committee on Banking, Housing, and Urban Affairs for the first time in Washington, DC. It has been more than a year since it was revealed that Wells Fargo employees had created over 3.5 million fake credit card and deposit accounts since 2009, as well as charged 490,000 car loan customers for insurance they did not need.
The fallout has been tremendous. Over 5,000 employees lost their jobs. A $185 million-dollar settlement with regulators was filed. A $142 million-dollar class action suit was settled. All of which helped cause the departure of their former CEO and Chairman John Stump and a stock price that has been struggling.
The company has been slow to recover, and Wells Fargo’s 10 percent growth since the scandal has been dwarfed by the 38 percent growth by the broader KBW Bank Index in that same period. This was hammered home by several of the Senators on the Committee; they also touched on the lack of leadership. Considering the fact that Sloan has been at the company for the better part of three decades, it can be surmised that he was probably part of the problem rather than a solution to Wells Fargo’s woes.
Senator Elizabeth Warren belittled Sloan and said that “Wells Fargo is not going to change with you in charge… The leadership question places some uncertainty for the stock.” Although battling a visibly irritated Committee, Sloan was able to walk “the fine line between conciliatory and competent” according to David Konrad from Macquarie Research. Konrad added that the figurative puddles that Sloan did step in “were shallower than those that drowned the previous CEO.”
The former CEO and Chairman Jon Stock appeared twice before the same Committee preceding his eventual dismissal earlier this year, and by most accounts, Sloan provided a slightly better direction for the company. However, Sloan will have to work on the culture that surrounds the bank, especially after John Kennedy, a Louisiana Republican, questioned the company culture that exists at Wells Fargo.
“I’m not against big,” Kennedy said, “With all due respect, I’m against dumb. I’m against business practices which have Wells Fargo first and the customers second. I think it ought to be the customer first and Wells Fargo second, I think that’s better for the customer, and better long-term for Wells Fargo.”
Other Senators such as Sen. Sherrod Brown, an Ohio Democrat, touched on the entrenched culture of ‘Wells Fargo first’ that seems to percolate from the corporate offices. When Sen. Brown asked if Wells Fargo would stop forcing customers to resolve complaints through private arbitration, Sloan responded with a swift “No.” He went on to state that “the reason is because we have made fundamental changes to the way we do business, so we have reduced the number of times that that ever is an issue.”
The issues surrounding Wells Fargo are far from over, and Sen. Warren is pushing for further terminations, including to the 12-person board of directors that were employed during the scandal. It is unclear when Tim Sloan will be called upon by the Senate Banking Committee again, but it is a matter of when, not if. The full hearing can be found in its entirety here.
Author: Andrew Rombach
Andrew writes engaging and informative content for readers looking to find information about topics such as student loans, credit cards, personal loans, and small business financing. Andrew’s work has been featured in Market Watch, Bankrate, The Penny Hoarder, and the Lacrosse Tribune.