Regulators Also Take Lumps as Lawmakers Bash Wells Fargo

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By Jeff Bater

Sept. 29 — Wells Fargo CEO John Stumpf remained the main target in his second appearance on Capitol Hill within 10 days over the bank's bogus account scandal, but its regulators took some hits, with lawmakers accusing them of being asleep as the fraud unfolded.

The House Financial Services Committee spent more than four hours criticizing Wells Fargo for the unauthorized opening of accounts by employees to meet sales goals. Stumpf, the only witness, endured attacks from both sides of the aisle, with one member of the panel, Rep. Michael Capuano (D-Mass.), asking Stumpf why he shouldn't be in jail.

Rep. Blaine Luetkemeyer (R-Mo.) criticized both Stumpf and bank regulators during his questioning. The lawmaker expressed dismay over the culture within the bank that allowed the conduct by thousands of employees.

“And I'm shocked that regulators sat on their thumbs this long and did nothing,” said Luetkemeyer, a former banker and banking regulator. “And while you're being fined, which I think is appropriate, the regulators ought to be fined as well. For them to take the fine and keep it is a travesty. They need to be fined as well and let that money go back to consumers because they were asleep at the switch, as well. There's so much to blame to go around on this, it's unbelievable.”

Wells Fargo settled the case by agreeing to pay the Consumer Financial Protection Bureau $100 million, the Office of the Comptroller of the Currency $35 million, and the city of Los Angeles $50 million. Reporting by the Los Angeles Times on Wells Fargo account practices prompted an investigation first by the Los Angeles city attorney and then the two federal regulators—the CFPB and the OCC.

‘Asleep at the Wheel.'

The CFPB comes under harsh criticism regularly during committee hearings from the Republican side, which is pushing to make the bureau a five-person commission and bring it under the congressional appropriations process. A bill (H.R. 5983) the chairman of the panel, Rep. Jeb Hensarling (R-Texas), introduced in September, the Financial CHOICE Act, would change the CFPB's name to the Consumer Financial Opportunity Commission.

Rep. Scott Garrett (R-N.J.), accused financial regulators of being “asleep at the wheel” as the fraud involving the big bank was occurring.

“If you look at one of those, the CFPB, the CFPB has one job,” he said. “CFPB has only one job in a regulatory framework and they completely blew it.”

Only the Beginning

In his opening statement, Hensarling promised the hearing is only the beginning of the investigation. “In the coming weeks, we will be questioning Wells Fargo executives,” he said. “If necessary, I will not hesitate to issue subpoenas because we will do what is necessary to get to the bottom of this.”

At one point, Hensarling told Stumpf he has a mortgage with the embattled bank. “I wish I didn’t,” the lawmaker said. “I wish I was in the position to pay it off because you have broken my trust as you have broken the trust of millions and it’s going to take a long time to earn it back.”

Near the end of the hearing, the committee's ranking member, Rep. Maxine Waters (D-Calif.), called for breaking up Wells Fargo.

The criticism of the bank comes from a committee that's been a beneficiary of its political largesse. Wells Fargo and individuals associated with the bank have contributed $293,758 to members of the House Financial Services Committee in the current election cycle, with $218,135 going to Republicans and $75,623 to Democrats. according to the Center for Responsive Politics’ OpenSecrets.org.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Mike Ferullo in Washington at mferullo@bna.com

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