Susan Walsh/AP Photo
Then–Wells Fargo CEO Tim Sloan testifies before the Senate Committee on Banking, Housing, and Urban Affairs, October 3, 2017.
David Dayen contributed reporting.
For weeks, the Biden administration has dithered on whom to select to run the Office of the Comptroller of the Currency (OCC), the main federal bank regulator. What was once a two-person race has narrowed, as former Treasury official Michael Barr has been “all but ruled out,” according to Bloomberg. Mehrsa Baradaran, the UC-Irvine law professor who was Barr’s main competition, remains the leading candidate. (Baradaran is a Prospect board member.) Manny Alvarez, the current head of the California Department of Financial Protection and Innovation, is also in contention, Bloomberg writes.
Now would be a good time to get going. Tim Sloan, the former Wells Fargo CEO who left his position two years ago, is seeking a $20 million deferred-compensation payout, and he could get it, if the bank secures the go-ahead from its regulator: the OCC. But the current head of the agency, a holdover from the Trump administration, has taken no action on the matter, regulatory sources said.
The fact that Wells Fargo’s former CEO could collect this payout highlights one way the Trump administration lightened oversight of Wall Street, and how President Biden has yet to take charge of the agencies he controls.
Sloan took over at Wells Fargo, the nation’s third-largest bank, in October 2016, the year it admitted to creating millions of bogus accounts to hit sky-high sales goals. He replaced John Stumpf, who had resigned in the wake of that scandal. Sloan spent a tumultuous two and a half years at the helm, as the “fake account” scandal worsened, and Wells Fargo admitted to cheating customers in other lines of business, from car insurance to mortgages.
Sloan was the bank’s president and chief operating officer during the fake-account scandal, and was widely seen as the heir apparent to Stumpf. Four months before taking over, and years after the first revelations of the scandal emerged in the Los Angeles Times, Sloan told American Banker that Wells Fargo’s aggressive cross-selling tactics were appropriate and “not going to change.”
Amid a sagging turnaround, an array of fines, and consequential Federal Reserve sanctions on Wells Fargo’s growth, Sloan stepped down in March 2019 and left the bank that June. He was paid tens of millions of dollars over three decades at Wells Fargo and then he was paid $40 million more as CEO, according to securities filings and industry sources. But now, he wants more.
Two piles of deferred stock compensation from 2017 and 2018 await Sloan once it fully vests. The current market value of that stock would be around $20 million. Lawyers representing Sloan, who now works for Fortress Investment Group, have told Wells Fargo that Sloan wants the payouts transferred to him, as outlined in his Wells Fargo contract, according to industry sources. Under the typical Wells Fargo vesting schedule, the stock awards are due to be fully vested this month.
Wells Fargo has not yet decided how to handle the Sloan payout, said industry sources, and the bank declined to comment for this story. Sloan declined to comment through crisis-communication firm Reevemark.
As Wells Fargo’s chief regulator, the OCC has a right to stop Sloan’s payout. A statute dating back to the savings and loan scandal of the 1980s gives the OCC some authority over the change to a bank’s board of directors and senior executive officers. The agency can also limit so-called “golden parachute” payments to departing executives and directors of troubled banks. The rule was intended to limit officers who played a role in damaging or destroying a financial institution from getting large paydays.
Under a deal Sloan reached with the Trump administration in April 2018, the OCC waived some of its right to block golden-parachute payments. However, the OCC still has broad powers to halt executive payouts like the one Sloan is seeking.
The OCC had nothing to say about a possible Sloan payout. “We’re not going to comment on personnel compensation matters of a particular bank,” said OCC spokesman Bryan Hubbard.
Biden has not nominated an interim OCC leader who could serve until a permanent pick is nominated and confirmed by the Senate. For now, the OCC is led by a career official, Blake Paulson, who has worked at the agency for more than 30 years in a variety of posts. An appointed OCC head, or a Senate-confirmed Biden nominee, would have more backing from the administration to make potentially controversial decisions like this.
Sen. Elizabeth Warren said the Sloan payout should be scrapped.
“Former CEO Tim Sloan was Wells Fargo’s biggest cheerleader for its massive fake accounts scam,” Warren said in a statement. “He got rich off of it and helped cover it up. It’s not enough that Sloan got fired. The Comptroller of the Currency should block this bankster from getting another penny from this fundamentally broken bank.”
As Wells Fargo’s chief regulator, the OCC has a right to stop Sloan’s payout.
Wells Fargo has not been able to grow its business since February 2018, when the Federal Reserve handed down punishment for the fake-account scandal, imposing a cap on the bank’s activities. Getting the growth cap lifted was a top priority for Sloan, but he failed to convince the Fed that Wells Fargo had changed and could prevent future customer abuses. The growth cap, conceived when Treasury Secretary Janet Yellen led the Fed, is still in place.
During Sloan’s tenure, Wells Fargo was faulted for a variety of fresh customer abuses and compliance breakdowns across the bank—including a case where a business unit led by Sloan used phony customer signatures to satisfy anti–money laundering rules.
When The Capitol Forum reported in February 2019 that Wells Fargo cut and pasted customer signatures to skirt anti–money laundering rules, Sen. Warren asked the Fed to keep the growth cap in place.
President Biden has the ability to prevent one of the executives most closely tied to the fake-accounts scandal from continuing to profit from his role at Wells Fargo. But choosing a replacement at OCC as quickly as possible is critical to that outcome.
This article is part of an ongoing partnership with The Capitol Forum, a subscription-based investigative reporting outlet. For more information about The Capitol Forum, please contact editorial@thecapitolforum.com.
