A Leading U.S. Regulator Wants to Loosen the Leash on Wells Fargo
A leading U.S. regulator wants to make it easier for Wells Fargo (WFC) to pay employees when they leave, loosening a restriction in place since a phony accounts scandal hit the bank last year, according to people familiar with the matter.
The initiative comes as President Donald Trump is trying to lighten rules on Wall Street and the bank regulator, Keith Noreika, acting Comptroller of the Currency (OCC), must weigh whether to vet new Wells Fargo executives.
If Noreika’s approach prevails, the OCC could go easier on Wells Fargo and any other large banks sanctioned in the future.
Since Noreika took control of the OCC in May, he has advocated easing up on sanctions imposed on Wells Fargo in the wake of the scandal over abusive sales practices, according to current and former officials.
Wells Fargo reached a $190 million settlement in September 2016 after admitting that its sales staff opened as many as 2.1 million accounts without customers’ consent. Since then the estimate has climbed to as many as 3.5 million.
As part of the deal with regulators, incoming Wells Fargo executives can face a vetting from the OCC while severance payouts must be cleared by the OCC and a sister agency, the Federal Deposit Insurance Corporation.
But Noreika wants officials to work faster when they review severance pay and the agency can choose to waive its check on incoming executives.
Wells Fargo declined comment on the reviews.
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Hundreds of Wells Fargo employees have had their severance payouts frozen when they left as regulators tried to determine what role those employees might have had in the scandal.
Under one proposal floated by the OCC, departing employees would collect severance automatically if regulators could not finish their review within weeks, according to one current and two former officials who were not authorized to discuss an internal debate.
Under another scenario, the OCC could push for payouts to a Wells Fargo employee without waiting for the FDIC to concur. The FDIC has the final say on severance and until now the decisions have always been made jointly.
The FDIC has resisted hurrying its severance reviews, according to those familiar with the discussions.
But the current FDIC chief, Martin Gruenberg, could be replaced within weeks by a President Trump nominee.
If that happens and Noreika prevails, it could provide relief for Wells Fargo as it faces fresh scrutiny for wrongly charging customers for car insurance and mortgages.
Noreika is expected to leave the OCC in coming weeks, but the matter could be settled by Joseph Otting, the former banker who is Trump’s permanent pick for the OCC. Otting is expected to favor a similar, light touch approach to financial rules.
The “golden parachute” rule is meant to halt payouts to employees who played a role in a bank’s problems, but Noreika has said too many innocent Wells Fargo employees are caught up in the reviews.
In a June 5 letter to a former Wells Fargo employee made public by the OCC, Noreika said that he had personally called Gruenberg to expedite a payment.
In the weeks after that letter was sent, sources said, the OCC has proposed speeding up the reviews, but the FDIC pushed back against setting “artificial” deadlines, according to one official.
“The OCC has sought ways to make regulatory reviews more efficient (and) complete in weeks not months,” OCC spokesman Bryan Hubbard said, while declining to discuss inter-agency deliberations.
The FDIC defended the pace of its severance audits, which in some cases have taken months to finish.
“When delays occur, it is generally because the applying institution provided incomplete or inconsistent information,” said Barbara Hagenbaugh, spokeswoman for the FDIC.
Severance payouts are simple to calculate for rank-and-file Wells Fargo employees who can get two weeks’ pay for each year of work. It gets more complex for senior executives who get a mix of salary, bonuses, stocks and other perks.
For example, James Strother, the bank’s former chief counsel who retired this summer, was among senior Wells Fargo executives that had $32 million in payouts frozen in March. But Strother has yet to repay a $310,000 interest-free loan Wells Fargo granted him in 2001, a year before such insider loans were banned, according to securities filings and the bank.
“Mr. Strother has informed us that he does plan on paying back the loan, as required and expected,” said Diana Rodriguez, a spokeswoman for Wells Fargo.
Strother declined to comment.
According to several former officials, the FDIC has authority to scrutinize such loans under their ‘golden parachute’ review, adding another layer of complexity to the process.