Lawmakers decry Wells' impact on CUs, other FIs
Lawmakers cited the unfair impact the Wells Fargo scandal and any subsequent regulation will have on credit unions and other financial institutions during a House Financial Services Committee hearing Thursday, where Wells Fargo Chairman and CEO John Stumpf faced intense grilling for more than four hours.
Rep. Mike Capuano, D-Mass., said Wells' actions – the fraudulent opening of more than 2 million consumer accounts – not only hurt Wells customers but will have an indirect, negative impact on credit unions, government-sponsored enterprises and student loan borrowers.
Reps. Andy Barr, R-Ky., and Bruce Poliquin, R-Maine, pointed out that credit unions and community banks bear the brunt of regulations inspired by bad actors like Wells Fargo. Poliquin referenced the 58 credit unions in his district. "These folks are relied upon in their communities," he said, adding that this scandal will lead to more "smothering" regulation for credit unions and others. He also noted the 13 settlements and fines Wells Fargo has faced over the past six years.
Rep. Mick Mulvaney, R-S.C., said the scandal might appear to validate Democrats' support for more regulation of banks; however, he argued that Dodd-Frank and CFPB did not prevent the scandal. "It happened after we supposedly fixed all of this with regulation," Mulvaney said. Mulvaney also criticized Wells Fargo's history with discriminatory lending.
During his opening statement, committee Chairman Jeb Hensarling, R-Texas, said consumers have been "ripped off by their bank and let down by their government." He pledged that the committee's investigation is "just beginning" and he questioned why CFPB and the Office of the Comptroller of the Currency did not catch the fraud sooner.
Hensarling also compared the fines Wells Fargo is faced to a "rounding error" in the bank's quarterly report and asked whether high-ranking employees have been fired. Stumpf said managerial-level staff had been fired.
Ranking Member Maxine Waters, D-Calif., noted that the Federal Reserve put Wells Fargo on notice for inappropriate sales goals in 2011 and questioned whether a notice to employees in 2007 about getting consumers' permission to open accounts meant executives have been aware of the problem since then.
Rep. Carolyn Maloney, D-N.Y., brought up Stumpf's sale of $13 million in Wells Fargo stock as being possibly related to the executive's knowledge of the scandal, which Stumpf denied.
Rep. Randy Neugebauer, R-Texas, noted the conflict in having one person serve as both CEO and chairman of a company's board. Rep. Nydia Velázquez said she would ask the Small Business Administration to investigate whether small business portfolios were affected by the fraud.
Rep. Brad Sherman, D-Calif., criticized the bank's arbitration arrangements and said customers who want to sue the bank should be able to do that. Sherman and Waters both said Wells Fargo is "too big to manage" and must be broken up. Waters also noted that the five largest banks in the country have failed the "living will" test.
Reps. Blaine Luetkemeyer, R-Mo., Sean Duffy, R-Wis., and Frank Guinta, R-N.H., all questioned Stumpf on the number of regulatory examiners that have been onsite at Wells Fargo. Stumpf said he did not know but estimated the OCC had 80 examiners onsite.
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