Happy Tuesday and welcome back to On The Money. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.
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THE BIG DEAL–Lawmakers blast Wells Fargo chief over response to scandals: House lawmakers on Tuesday skewered the head of Wells Fargo as he argued that the bank has made vast improvements and turned the page in the aftermath of scandals that led to a slew of lawsuits and unprecedented federal and state penalties.
{mosads}Wells Fargo President and CEO Timothy Sloan told members of the House Financial Services Committee that the company has improved its internal oversight, overhauled its management and compensated customers harmed by misconduct across its lines of business in the three years since the scandals.
Lawmakers weren’t buying it: His testimony, though, did little to appease lawmakers in both parties just days after The New York Times reported that Wells Fargo employees are still breaking rules to meet performance standards tied to sales goals. I’ll fill you in on the contentious hearing here.
How we got here:
- Wells Fargo’s troubles began in September 2016 when the Consumer Financial Protection Bureau (CFPB) fined the bank $185 million for opening and charging fees on more than 1 million accounts for customers without their consent.
- The bank landed in hot water again in April 2018 when it paid $1 billion to the CFPB and Office of the Comptroller of the Currency to resolve allegations it had charged mortgage borrowers inappropriate fees and forced loan customers to purchase unnecessary auto insurance.
- The Federal Reserve in January 2018 banned Wells Fargo from expanding its operations, ordered the bank to conduct an internal probe into its internal oversight and risk management, and explain how it planned to prevent future scandals.
Sloan: It’s getting better all the time
- Sloan blamed Wells Fargo’s woes on a decentralized risk management structure and the bank’s previous “incentive plan that was much too focused on selling products as opposed to providing good service and advice.”
- “Wells Fargo is committed to making things right with our customers and earning back the public’s trust. We are dedicated to compensating every customer who suffered harm because of our mistakes,” Sloan said at the hearing.
- “We have more work to do,” Sloan added, insisting the bank would “act with honesty, integrity and accountability.”
Bipartisan backlash
- Sloan faced anger from both sides of the aisle, a rare backlash from a panel with a history of partisan bickering. Rep. Maxine Waters (D-Calif.), the head of the committee, called Wells Fargo a “recidivist financial institution that created widespread harm with a broad range of offenses” and suggested the bank could be “too big to manage.”
- Rep. Patrick McHenry (N.C.), the panel’s top Republican, criticized the company for steady reports of sales scandals since 2016. “Each time a new scandal breaks, Wells Fargo promises to get to the bottom of it. It promises to make sure it doesn’t happen again,” he said. “But a few months later, we hear about another case of dishonest sales practices or gross mismanagement.
- Rep. Ann Wagner (R-Mo.) said Wells Fargo “betrayed” the trust and “took advantage of customers in order to meet sales performance goals and fraudulently improve earnings and share prices.”
- “Your bank foreclosed on 545 customers because of that error,” said Rep. Rashida Tlaib (D-Mich.), about a mistake that hit hundreds with higher mortgage costs. “They didn’t lose a boat. They lost their home. What are you doing to help them?”
What comes next: Sloan’s hearing was a preview of the tough oversight Waters has vowed to enforce on the nation’s financial institutions since taking over the panel. The CEOs of other major U.S. banks are expected to appear before the committee later this year.
- After the hearing, Waters said she would reintroduce a bill that would break up big banks with track records of customer abuse, adding that it would likely apply to Wells Fargo. She also suggested regulators take a look at removing Sloan from the bank.
- But Republicans rejected Waters’s connecting Wells Fargo’s scandals to its size, blaming mismanagement and incompetence instead of its $1.87 trillion in assets.
- “Your actions have fueled the hyperbolic and anti-bank rhetoric that you will hear today,” Rep. Andy Barr (R-Ky.) told Sloan. He said the bank “damaged and mistreated its customers,” but that it “had nothing to with size.”
ON TAP TOMORROW:
- The House Financial Services Committee holds a hearing on National Flood Insurance Program (NFIP) reauthorization, 10 a.m.
- The Center for American Progress hosts an event entitled “The Case Against Corporate Tax Boondoggles,” 12 p.m.
- The House Ways and Means Committee holds a hearing on enhancing Social Security benefits, 2 p.m.
- A House Financial Services subcommittee holds a hearing on proposals to promote corporate transparency and deter financial crime, 2 p.m.
LEADING THE DAY
Pence discussing offer to kill Trump emergency disapproval resolution: Vice President Pence is discussing an offer with Republican senators that could lead to the defeat of a Democratic resolution overturning President Trump’s emergency declaration to build a wall on the Mexican border, according to GOP sources briefed on the matter.
Under the deal discussed between Pence and GOP senators, Trump would sign legislation reining in his power to declare future national emergencies if they defeat the resolution of disapproval.
Killing the resolution on the Republican-controlled Senate floor would spare the president a major embarrassment and avoid him having to issue the first veto of his presidency.
But there is some skepticism among GOP senators whether Trump will actually go through with it. And the plan is hurt by the fact that a bill to curb the president’s power to declare national emergencies won’t come to the Senate floor until after the March recess. The Hill’s Alexander Bolton tells us why.
Chances of passing Dem budget are ’50-50,’ says chairman: Democrats have only a “50-50” chance of putting a budget resolution on the House floor, House Budget Committee Chairman John Yarmuth (D-Ky.) said Tuesday, amid Democratic infighting over policy priorities.
“Probably 50-50,” he responded when questioned as he headed to a meeting with the moderate New Democrats faction to discuss the budget.
His comment marks a sharp turnaround from Monday afternoon, when Yarmuth told reporters that he was meeting with the various factions within the caucus as he drafts the Democrats’ alternative budget, and suggested all parties were uniting behind his evolving plan.
“So far we haven’t run into any huge ideological obstacles to putting together a reasonable budget resolution,” he said at the time. The Hill’s Niv Elis and Mike Lillis tells us why here.
- Failure to pass a nonbinding budget resolution, which is typically seen as a political document, could illustrate the extent to which the Democratic Party is fractured.
- The Dem divides: The progressive wing of the party is pushing for increased spending on domestic programs — and higher taxes to pay for it — whereas its more moderate wing is concerned with fiscal responsibility and defense.
Trump faces pressure over Boeing safety concerns: The Trump administration held out Tuesday as other countries grounded Boeing 737 Max 8 aircraft amid safety concerns following the second fatal crash in recent months involving the plane.
The White House gave no indication that it would force the Federal Aviation Administration (FAA) to temporarily ban the 737 Max models, despite precautionary measures taken by the European Union, China, Indonesia and numerous foreign carriers.
“We have to review and see what actually took place,” White House press secretary Sarah Huckabee Sanders said on Fox News. “This is going to be a process and we’re going to be in constant contact through the Department of Transportation, the FAA and make a determination at the appropriate time.”
Boeing CEO Dennis Muilenburg assured Trump in a phone call Tuesday that the company’s aircraft are safe. Earlier in the day Trump had tweeted that “airplanes are becoming far too complex to fly.”
The controversy over Boeing’s fleet of 737 Max 8 planes is putting fresh scrutiny on the aviation industry under the Trump administration. The Hill’s Brett Samuels has the latest on Boeing’s woes and the administration’s response.
GOOD TO KNOW
- Members of the Senate Banking Committee grilled CFPB Director Kathy Kraninger on Tuesday over the agency’s decisions to cut down its payday lending rule and to stop examining financial firms for compliance with the Military Lending Act.
- Democratic 2020 presidential candidates will meet in rural Iowa later this month to debate monopolies and approaches to antitrust enforcement, The Hill has confirmed.
- GOP Sens. Mike Lee (Utah) and Joni Ernst (Iowa) on Tuesday rolled out a paid parental leave proposal, as the issue is getting increasing attention from policymakers on both sides of the aisle.
- The New York attorney general’s office has subpoenaed Deutsche Bank and Investors Bank for records connected to four Trump Organization products and an unsuccessful bid to purchase the Buffalo Bills football team on Monday, according to The New York Times.
- The Dow Jones Industrial Average fell on Tuesday as shares of Boeing dragged down the broader index, according to CNBC.
- Congressional Democrats are intensifying their investigation into whether President Trump sought to block the $85 billion AT&T-Time Warner merger due to his longtime feud with CNN.
- Former Vice President Joe Biden slammed President Trump’s fiscal 2020 budget proposal, saying that Trump wants to make the middle class pay for tax cuts for the rich.
ODDS AND ENDS
- The ride-hailing company Uber will pay $20 million to settle lawsuits filed in the state of California contesting the company’s classification of its drivers as independent contractors and not full employees.
- Dick’s Sporting Goods announced Tuesday that it will stop selling firearms at dozens of its stores.