In this report, we assess the policy implications of the contentious and lengthy HFSC session today with Wells Fargo President and CEO Charles Scharf.  Citing the need to rein in “abusive megabanks” by reducing their footprints, Chairwoman Waters (D-CA) made clear that the committee will advance legislation that addresses provisions of her “megabank” bill (see FSM Report GSIB11).  As noted, the bill has been split into two draft bills, one that would allow or even require regulators to put a “recidivist” consumer-offending GSIB into receivership and another requiring regular written attestations affirming compliance with consumer protections from GSIB boards and senior management.  Republicans led by Ranking Member McHenry (R-NC) strongly resisted, arguing that Wells Fargo has been the only GSIB with significant management shortcomings and that the current regulatory system has held it accountable.  The hearing also included discussion of Wells Fargo’s response to COVID-19, with Rep. Sherman (D-CA) pushing the bank to cease dividends and stock buybacks until the impact of the virus is understood.  Mr. Scharf would not agree to this, only saying that he will run the bank prudently.  Rep. Tipton (R-CO) asked whether CCAR shows that Wells Fargo is well-capitalized for a downturn caused by the virus; Mr. Scharf said that it does.  However, Rep. Casten (D-IL) also pushed hard on both the bank’s and overall GSIB exposure to the oil sector, fearing emerging systemic risk.

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