74 FORTUNE FEBRUARY/MARCH 2021
unveiling, the Justice Department announced that Wells
would pay $3 billion to settle criminal charges related to
the accounts scandal. The consensus was that this would
be Wells’ last major penalty, but it offered another stark
example of the scandal’s erosion of the bank’s profits. An-
other sign of the lingering cost: In 2020, Wells Fargo spent
$6.7 billion on “professional/outside services”—more than
9% of total revenue —the lion’s share of which reflects legal
and consulting fees related to the post-scandal cleanup.
Meanwhile, the pandemic forced Wells Fargo to put daily
emergencies ahead of long-term reforms. Scharf, still in
the early days of meeting Wells’ workforce, found himself
confined to his Long Island home office. Keeping the bank’s
thousands of branches open was essential—even amid
lockdowns, Wells had “1 million customers a day coming
into our branches,” says Mack—but keeping them safe, and
transitioning nonbranch employees to remote work, was a
logistical obstacle course.
COVID-19 also triggered a mini-scandal that echoed the
bank’s past misdeeds. After the government enacted mort-
gage relief measures to help people who couldn’t keep up
with payments, no fewer than 1,600 borrowers complained
that Wells Fargo had placed their loans in forbearance with-
out their consent—an act that could actually harm the bor-
rowers’ credit ratings and prevent them from refinancing.
“We were erring on the side of trying to help customers in a
very difficult time,” Scharf says of the snafu, which the bank
scrambled to correct. “Every institution makes mistakes.”
The bank also entangled itself in difficult questions
around diversity. No incident from his first year at Wellsror. Six months after Sloan stepped down, Scharf got the
job. Solving the bank’s regulatory issues, Scharf said shortly
after his appointment, would be “clearly the first priority.”
For the first meeting of Wells Fargo’s oper-
ating committee under the new CEO, its leaders gathered
in a windowless conference room in St. Louis to address
the daunting business of turning the bank around. “Char-
lie brought in a legal pad—not a PowerPoint presentation,
not 40 pages of colored pictures the way that an invest-
ment bank would present—with a page and a half of
notes, line by line, that he wanted to go through to explain
the way he does business,” Weiss recalls. “It was a disarm-
ing, casual, but very focused discussion with no baloney.”
Matter-of-factness and a “no frills” demeanor are com-
mon threads in descriptions of Scharf; his directness can
be as striking as his trademark shock of white hair. But
plainspokenness can also be an asset for a chief executive
with bad news to deliver and tough problems to solve.
The biggest problem Scharf identified at Wells Fargo was
an exceptionally decentralized organization—one lacking
the clear lines of accountability that might have prevented
the fake-account fraud. The bank also lacked risk-and-
compliance safeguards that most banks of comparable size
already had. “We did have a relatively siloed organization,
where you had intact businesses that were running a bit
independently,” says Mary Mack, who has been with Wells
for 26 years and now leads its consumer and small-business
banking division. “I don’t think we did a very good job of
stepping back and saying, ‘Could that condition or set of
weaknesses actually exist across the entire company?’ ”
Scharf began a major overhaul, starting with turnover at
the top. Nine of the 17 people now serving with Scharf on
the bank’s senior leadership committee are new hires. Prior
to last year, the role of chief operating officer didn’t exist at
Wells Fargo. Scharf created it and recruited Scott Powell,
a former colleague at Citi and JPMorgan, to fill it. Powell
most recently served as CEO of Santander’s U.S. business,
where he helped that bank cope with regulatory sanc-
tions of its own. Several other new executives are also past
colleagues of Scharf ’s: CFO Mike Santomassimo had the
same role at BNY Mellon; Mike Weinbach and Barry Som-
mers, who now head Wells’ consumer lending and wealth
management divisions, respectively, are JPMorgan alumni.
In February 2020, Scharf unveiled a reorganization
plan that redrew the company’s business lines across five
distinct divisions. Just as important was a reconfiguration
of Wells’ risk-management system: Each of the five divi-
sions now has its own dedicated risk officer—a structure
designed to ensure no unit of the bank is cutting corners.
Analysts hailed Scharf for bringing Wells Fargo in line
with other banks’ best practices. But subsequent events
offered persistent reminders of the work that remains to
be done. Last February, just days after the reorganization’s
–50%050100150%
JPMORGAN
CHASECUMULATIVE FROM DEC. 31, 2015, TO JAN. 20, 2021CITIGROUPBANK OF
AMERICAWELLS
FARGO138.7%36.9%112.0%–29.4%2016 2017 2018 2019 2020 2021
SOURCE: BLOOMBERGTOTAL RETURNS FOR THE ‘BIG FOUR’ BANK STOCKS