How New York became Wells Fargo’s new center of power
For decades, as Wells Fargo grew into one of the nation’s largest banks, the company kept its distance, both geographically and psychologically, from Wall Street.
That posture has been changing during the four-month-old tenure of CEO Charlie Scharf, a product of New York’s hard-charging banking culture whose office is located in a new tower on Manhattan’s West Side. Several of Scharf’s most important hires so far, including Chief Operating Officer Scott Powell, are also based in New York.
Scharf and his growing band of outsiders are scrambling expectations inside of a bank where top executives once had a reputation for projecting a pleasant face but failing to hold their colleagues’ feet to the fire. That nonconfrontational approach became a liability in recent years as Wells Fargo’s regulatory problems multiplied.
One former executive at the San Francisco-based bank said that the firm’s previous leadership team generally seemed satisfied when executives reported that they were fully committed to fixing a problem. By contrast, Scharf has been known to kick an executive out of a meeting if that person does not have the answers to his questions, according to this source.
“He only cares about results and meeting commitments,” this former executive said. “If you can’t or don’t deliver on time, in scope, and on budget, he’ll find someone who will.”
A Wells Fargo spokesman declined to comment and the company turned down an interview request.
In his own public remarks about the bank’s various regulatory issues, Scharf has placed a strong emphasis on results.
“The management team will be judged and held accountable for resolving these issues,” he said during the company’s earnings call in January. “Just know that we’re focused on outcomes here.”
One current executive at the San Francisco-based bank said that Scharf’s blunt style represents a refreshing change. “He is unscripted,” this source said. “He is genuine and he’s no bullshit.”
Scharf’s direct approach was on display Friday when he denounced the corporate behavior that gave rise to the bank’s fake-accounts scandal and ultimately resulted in a $3 billion settlement with two federal agencies. “The conduct at the core of today’s settlements — and the past culture that gave rise to it — are reprehensible and wholly inconsistent with the values on which Wells Fargo was built,” Scharf said in a written statement.
Scharf, 54, has spent much of his career in New York’s famously competitive banking sphere.
He was still an undergraduate at Johns Hopkins University when he reportedly sent his resume to Jamie Dimon, who was then a top executive at Commercial Credit and a rising star in the industry. His career took off from there. Scharf has held high-ranking jobs at Citigroup and JPMorgan Chase and been the CEO at Visa and Bank of New York Mellon.
Scharf’s arrival at Wells Fargo represented a cultural shift for a company that had deep roots in San Francisco, Minneapolis and Charlotte, N.C., but not New York.
Historically, Wells Fargo’s distance from the nation’s financial capital dovetailed with its emphasis on retail banking and its general aversion to high-risk bets. Even after the company’s 2008 acquisition of Wachovia, which enlarged its footprint in investment banking, Wells Fargo occupied nearly as much square feet of space in the Des Moines, Iowa, area as it did in the New York region.
“We are a Main Street bank,” then-CEO John Stumpf wrote in a 2016 letter to shareholders.
Stumpf was a Minnesota native who fostered an uncontentious culture in the bank’s executive suite. His successor, Tim Sloan, took a similar approach even as scandals and regulatory orders piled up. Last month, Stumpf agreed to pay a $17.5 million penalty, and to accept a ban from banking, in order to settle civil charges brought by regulators.
Wells Fargo’s increased focus on New York City actually began late in Stumpf’s tenure as CEO. In December 2015, the company announced that it was purchasing approximately 500,000 square feet of office space at 30 Hudson Yards, a 1,296-foot office tower that was then under development.
Part of the bank’s thinking was that the new digs would help Wells to attract top New York-based talent.
The gleaming skyscraper opened last year, and Wells Fargo has recently been consolidating corporate and investment banking teams that were previously spread throughout Manhattan. The bank’s new space includes two state-of-the-art trading floors and features views from the Hudson River to the East River.
Since Scharf took the reins, the company has announced the addition of several of his former JPMorgan Chase colleagues to his team in New York.
Powell, the former CEO of Santander US who reports directly to the CEO, oversees regulatory relations and regulatory execution. Michael Cleary most recently was head of consumer and business banking under Powell at Santander and is responsible for overseeing and managing sales practices. Mike Weinbach, who is scheduled to join Wells Fargo in May, will be the CEO of consumer lending. He was most recently the head of home lending at JPMorgan Chase.
Also based in New York is Bill Daley, the former chief of staff to President Barack Obama, who was hired late last year and serves as the bank’s vice chairman of public affairs. Daley had been vice chairman at BNY Mellon when Scharf was CEO.
Two other members of Wells Fargo’s senior leadership team — head of technology Saul Van Beurden and CEO of corporate and investment banking Jonathan Weiss — were already based in New York prior to Scharf’s arrival.
Wells Fargo continues to have a smaller presence in investment banking than some of its peers, and none of the recent changes would seem to suggest that the bank is likely to chart a new strategic course anytime soon. Scharf has said that he is spending almost all of his time on resolving regulatory issues.
Scott Siefers, an analyst at Piper Sandler, said that he doubts Wells Fargo is currently considering an expansion of its presence in capital markets businesses. “It’s probably too early to think about what that next chapter will be,” he said.
Nor do the recent personnel changes mean that New York is now the sole locus of power inside of Wells Fargo. Two other prominent hires during the Scharf era — Controller Muneera Carr and Chief Strategic Enterprise Risk Officer Price Sloan — are based in Charlotte. A third recent hire, Ray Fischer, who heads cards, retail and merchant services, works from Wilmington, Del.
Moreover, it would be a mistake to think that any executive can remake the corporate culture of a $2 trillion-asset bank in a matter of months. “Transforming a culture is a five- to 10-year project,” John Williams, the president of the Federal Reserve Bank of New York, said in a 2018 speech.
Scharf has downplayed the significance of locating his base in New York, indicating that he does not plan to spend much time in his own office.
“We have over 25,000 or 26,000 people in Charlotte, we have thousands of people in New York, we have thousands of people in St. Louis, thousands of people in Minneapolis, thousands of people in San Francisco,” Scharf said last September. “And so I’m looking forward to be present in all of those places.”
Still, Scharf’s decision to run the West Coast-based lender from the East Coast has drawn criticism from the bank’s largest shareholder.
Charles Munger, the vice chairman of Berkshire Hathaway, said “it’s outrageous” that Scharf has chosen to stay in New York. “Anybody should move for a big job like that,” Munger told Bloomberg News. After selling 55 million shares in Wells Fargo in the fourth quarter, Berkshire Hathaway still owns around 323 million shares in the lender.
In a CNBC interview last week, Berkshire Hathaway Chairman and CEO Warren Buffett acknowledged the recent stock sales, but he declined to comment on whether they were influenced by his view of Scharf’s plans for the bank.
Before Wells Fargo’s board hired Scharf, Buffett argued that the bank’s next CEO should not come from Wall Street.
Others in the investment community believe that Scharf’s presence in New York may be beneficial, given the amount of time that the company’s CEO needs to be spending in talks with Washington-based regulatory agencies.
“There’s so much that he can do on the Eastern seaboard, given what they’re dealing with right now,” said Marty Mosby, an analyst at Vining Sparks.