The Washington Post - 11.03.2020

a12 eZ re the washington post.wednesday, march 11 , 2020

BY RENAE MERLE

Wells Fargo has suffered from a
broken culture and failed leader-
ship but can turn itself around, its
new chief executive told lawmak-
ers Tuesday in the bank’s latest
pitch to emerge from years of
scandal and controversy.
Charles Scharf is the third Wells
Fargo chief executive in three
years to try to convince Congress
that he can turn around the trou-
bled bank. Rep. Maxine Waters
(D-Calif.), the chair of the House
Financial Services Committee,
started the hearing by telling
Scharf, who started in the job in
October, that the two CEOs who
preceded him resigned shortly af-
ter testifying, eliciting laughs in
the r oom.
“I wish you luck,” Waters said.
“It is clear to this committee that
the bank you inherited is essen-
tially a lawless organization that
has caused widespread harm to
millions of consumers throughout
the n ation.”
Wells Fargo is an important fi-
nancial institution that was badly
managed but is being r ehabilitat-
ed, Scharf told the committee.
“People c an trust Wells Fargo to do
the r ight thing,” h e said.
Scharf’s efforts to repair the
bank’s reputation became more
difficult last week when the F inan-
cial Services Committee released a
more-than 100-page report that

Economy & Business

utilities

PG&E reaches

deal with FEMA

PG&E Corp. r eached a deal
with the U.S. Federal Emergency
Management A gency over
$3.9 billion in relief Washington
provided after the utility’s power
lines s parked devastating
wildfires.
A lawyer for PG&E announced
the agreement during a hearing
Tuesday before a U.S. Bankruptcy
Court judge in San Francisco. T he
utility a lso reached a deal with
California’s emergency services
office over additional c laims.
Details will b e filed with the court
in the c oming d ays, the lawyer,
Stephen Karotkin said.
The deal o ver emergency aid
brings PG&E one step closer to
emerging f rom Chapter 11, which
the company entered last year
facing $30 billion in c laims from
fires blamed o n its equipment.
Victims of those blazes had been
fighting the payments to FEMA
in court, saying the agency would
be taking m oney from a $13.
billion pot PG&E set aside for
them.
T he federal agency argued i t
had an obligation to recover costs
of critical services it provided in

the aftermath of blazes in 2015,

2017 a nd 2018, including medical

expenses and home repairs.

— Bloomberg News

streaming

GE, 2 others in pool to

collect device royalties

General Electric, Ericsson and

NTT Docomo have j oined a

patent-licensing pool that is

seeking to collect royalties on

devices used in the booming

movie-streaming market, setting

up a potential fight with Google,

Apple and Microsoft.

The pool b rings t ogether

hundreds o f patents o wned by a

dozen companies as a “one-stop

shop” f or companies that use the

VP9 and AV1 video coding

formats, according to Sisvel

International, a global

intellectual property c ompany

organizing t he pool. The patents

are used to compress video and

are key to streaming media.

But the new pool could face

pushback from c ompanies t hat

developed the two formats,

including Google. The owner of

YouTube created the VP

program for video compression

as a royalty-free o ption to the

MPEG standard. AV1 was created

by the A lliance f or Open Media,

whose members include Apple,

Samsung and Microsoft.

— Bloomberg News

also in Business

Sony Pictures on Tuesday said

it was postponing the r elease of

movie “Peter Rabbit 2: The

Runaway” t o August from March,

citing disruptions in movie

markets. The decision followed

the announcement l ast week that

the new James Bond movie “No

Time to Die” would be postponed

to November f rom its previously

scheduled A pril release because

of disruptions t o moviegoing in

China and other parts of Asia due

to the coronavirus.

Dick’s Sporting Goods, the

largest U.S. sporting-goods

retailer, plans to accelerate its

retreat from g un sales, removing

weapons and other hunting

products from about 440 more

stores.

Sweden’s Riksbank, which

revealed Monday that one of its

board m embers had caught the

coronavirus, does “not see a lower

policy rate as the most important

measure at p resent,” Gov. Stefan

Ingves said in a statement o n

Tuesday. Instead, the bank’s

“assessment right now is that

maintaining the supply o f

liquidity is the most important

thing,” h e said. “This could be

more generous terms for loans to

banks a nd/or direct purchases o f

securities.”

New Jersey is pushing f or

higher passenger-vehicle tolls

this year — and regular increases

in the future — to pay for

improvements to its Turnpike

and Garden State Parkway. T he

proposal would increase average

charges on the Turnpike by a

maximum $1.25, and on the

parkway by 30 cents at m ost,

according to a notice of three

public hearings to start March 18.

Beginning in 2022, tolls “are

proposed to be indexed at a n

amount to be determined, but in

no case more than 3 percent

annually,” a ccording to the n otice.

Foresight Energy h as f iled for

bankruptcy with plans to hand

ownership to its creditors. T he

filing in U.S. Bankruptcy Court

for the Eastern District of

Missouri is another sign that

efforts to stem coal’s d ecline are

not working. A wave of U.S.

miners have filed for Chapter 1 1

in recent years, i ncluding Murray

Energy, w hich owns a controlling

stake in Foresight. Its owner,

Robert Murray, is an outspoken

supporter of President Trump,

who pledged to save the industry.

The family office of Ernesto

Bertarelli, Switzerland’s r ichest

person, has hired C yrus Jilla to

help run its investments. Jilla, 50,

who previously headed a Fidelity

International investment unit,

will be chief executive of Northill

Capital, Bertarelli’s Waypoint

Capital said Tuesday in a

statement. L ondon-based

Northill takes stakes in money

managers g lobally.

— From news reports

coming today

8:30 a.m.: L abor Department

releases consumer price index for

February.

2 p.m.: Treasury r eleases

federal budget February.

digest

victor r. caivano/associated press

A cowboy herds cattle at the Mercado de Liniers, the country’s

largest livestock market, outside Buenos Aires. Only about 250

animals were sold T uesday due to a strike organized by farming

employers federations to protest a tax increase on soybean exports.

crats to break up the bank, which

has nearly $2 trillion of assets,

were ill-advised. “We know break-

ing up the bank is n ot the answer,”

he said.

Rather t han holding three h ear-

ings on Wells Fargo this month,

the committee should focus on

more pressing issues, including

the spread of the novel coronavi-

rus, McHenry said. “Our constitu-

ents have r eal concerns,” he said.

Two former Wells Fargo board

members are to testify Wednes-

day, and several bank employees

are to testify later this month.

[email protected]

 More at washingtonpost.com/

business

tice Department and the Securi-

ties and Exchange Commission,

acknowledging that f or more than

a decade, thousands of employees

falsified records, forged signa-

tures a nd misused customers’ per-

sonal information to meet unreal-

istic sales goals, in the process

opening millions of accounts that

consumers d id not want.

“A s we sit here today, we have

not yet re-earned the trust that I

would like the Wells Fargo name

to represent,” S charf told the c om-

mittee. B ut “we in fact c an do that.”

Rep. Patrick T. McHenry (N.C.),

the ranking Republican on the

committee, said that although

Wells Fargo had been “ grossly mis-

managed,” calls by some Demo-

ing the worst consumer abuses.

“For the life of me, I don’t know

why you took this job,” said Rep.

Gregory W. Meeks (D-N.Y.), a sen-

timent repeated by several other

lawmakers.

Wells Fargo is among the coun-

try’s largest and most profitable

banks but has struggled to over-

come a scandal involving accounts

that were opened in clients’ n ames

without their knowledge. That

scandal ballooned as the bank ad-

mitted to other consumer abuses,

including mistakenly foreclosing

on hundreds of clients’ mortgages

and repossessing the motor vehi-

cles of t housands o f others.

Last m onth, t he b ank reached a

$3 billion settlement w ith the Jus-

he said.

The bank is being reorganized,

and new leaders have been

brought in, Scharf said, adding

that he spends 75 percent to

80 percent of his time addressing

Wells Fargo’s regulatory head-

aches rather than expanding its

business. “Simply said, we had a

flawed business model in how the

company was managed,” he said.

“We have not yet done what is

necessary to address our short-

comings.”

The questioning of Scharf was

generally less contentious than

that of his predecessors, as he re-

peatedly acknowledged the bank’s

faults and reminded lawmakers

that he wasn’t at Wells Fargo dur-

alex Brandon/associated press

Wells Fargo chief executive Charles Scharf, center, arrives to testify at a hearing of the House Financial Services Committee on C apitol

Hill on T uesday. “We have not yet done what is necessary to address our shortcomings,” Scharf told the Maxine Waters-led committee.

○

dow 25,018.

Up 1,167.14, 4.9% ○

nasdaQ 8,344.

Up 393.58, 5.0% ○

s&P 500 2,882.

Up 135.67, 4.94 ○

gold $1,660.

doWn $15.40, 0.9% ○

crude oil $34.

Up $3.23, 10.4% ○

10-year treasury

doWn $25.90 per $1,000; 0.8% Yield

currencies

$1= 105.54 Y en, 0.89 eUro

plan,” s he n oted.

The volatility i n the stock

market is a reminder that p arents

need to pay attention to t he

allocation of their 529 plans, s aid

Carolyn McClanahan, a CFP w ith

Life Planning Partners i n

Jacksonville, F la.

“This is one reason we use

‘aged b ased’ portfolios for 529

plans, so the risk is d ialed back

automatically,” McClanahan s aid.

I know you’re frightened by t he

rocky m arkets. I am, too. B ut

don’t l et f ear drive your d ecision-

making.

Have a question about retirement or

personal finance? Join Michelle for an

online Q&a every thursday at 12 p.m.

eastern time. readers may write to

Michelle singletary at the Washington

post, 1301 K st. nW, Washington, d.c.

20071 or

[email protected].

to read previous color of Money

columns, go to http://wapo.st/

michelle-singletary.

of the Bryant Park Investor

Center at F idelity Investments.

“When t here’s volatility i n the

market and you h ave time on

your side, you’re basically b uying

things o n sale,” Kruger said.

“Weeks ago, things were

expensive. Now they’re c heaper.”

Now’s a good time to invest in a

529 plan and increase your

contributions using an

investment strategy called “dollar

cost averaging,” Kruger advised.

Under this method, you regularly

invest no matter what t he market

is doing. The effect is that you buy

more of an investment when

prices are low and l ess when costs

are high.

Also keep in mind t hat if you

stop investing i n a 529 plan, you

could lose a valuable state tax

deduction, said Corbin B lackwell,

a New York-based C FP a t

Betterment.

“Many states p rovide t ax

breaks for residents who

contribute to that state’s 529

roller coaster ride of m arket

volatility returns and it’s t ime to

cash out and pay up for w hat we

were saving for, it’s n o fun to pull

money o ut at a beaten-up value.

Better w e had just passed up

some of the gain by being a long-

term investor who got out a little

too s oon b ut still made a great

rate of return.”

And what about n ew

contributions?

Keep the money i n cash, said

CFP D avid Holland of Holland

Advisory Services in F lorida.

“That’s prudent given the

proximity to use.”

I suggested to the c ouple that

their son apply t o an in-state

school, in which c ase — even with

the m arket d ownturn — they

should have enough saved

already.

If you’ve got plenty of time

before your child g oes t o college

and y ou’re putting money in a 529

plan, k eep funding i t, s ays

Jennifer Kruger, b ranch m anager

In t his s ituation, e xperts I

reached out t o said t hat the

couple shouldn’t b e heavily

invested in stocks.

“Because equity markets are

uncertain w ith r espect to short-

term valuations even in t he best

of times, I routinely recommend

to clients t hat as their children

approach their junior and senior

years o f high s chool, t hey keep

their investments out of equities

for f unding the f irst 12 to 24

months of c ollege at a minimum,”

said Lynn Ballou, a certified

financial planner (CFP) and

partner at E P Wealth A dvisors in

Lafayette, C alif.

The time t o aggressively invest

in 529 funds is w hen your child

has y ears b efore heading off to

college, Ballou s aid.

“It’s hard to take the h igh road

and m ove to more conservative

pastures when markets are

skyrocketing u p, because i t feels

like we are leaving money on the

table,” s he said. “But when t he

I’m glad readers are reaching

out f or advice. This week, I

received an e mail from a

Maryland c ouple investing in a

529 college-savings p lan. Their

son i s graduating f rom high

school i n a little over a year a nd

will be applying to out-of-state

schools, mostly in the $60,000- to

$70,000-a-year retail r ange.

A 529 savings plan allows your

contributions to grow t ax-free. I f

the f unds are used f or qualified

educational expenses, earnings

are not taxed at t he f ederal or, in

most cases, state level.

“We had saved about $150,

in a 529 account before t he

coronavirus outbreak sent m arkets

tumbling,” t he mother w rote. “ We

don’t h ave a lot of time to wait out a

recovery — a s we do for r etirement.

We h ad already begun to m ove

some of t he 529 investments i nto

more conservative funds, but are

wondering if we should s top

pouring money into a dropping

529?”

W hen my h usband
tells me to “calm
down,” e ven i f my
concern is
warranted, I want
to punch h im.
In my mind,
when he says
those two words,
all I hear is:
“You’re being
irrational.”
But I know his heart, a nd that’s
not w hat he’s s aying. He just
knows t hat I can let my e motions
get the better o f me.
For natural worriers like me,
when there’s a threat to our w ell-
being, our g o-to e motion i s panic.
So I understand w hy p eople a re
fleeing equities n ow that t he
stock market i s having some of its
worst d ays in history.
However, you can’t l et y our
feelings drive your f inancial
decisions. It’s o kay to feel what
you f eel, b ut please p ause before
you m ake a move.

Even when the market is iffy, you should keep funding your kid’s 529 plan

Michelle
Singletary

The Color
of Money

found that the bank repeatedly

failed to live up to regulators’ de-

mands that it repay consumers

who were harmed by its actions

and did not aggressively address

its c ultural problems, d espite pub-

lic promises. Two of the bank’s

board members resigned Sunday

after the report showed they had

resisted becoming involved in ad-

dressing Wells Fargo’s problems.

On Tuesday, Waters asked the

Justice Department to investigate

statements that former Wells Far-

go c hief executive Tim Sloan made

to the committee last year, which

the c ommittee report called “inac-

curate and m isleading.”

“Because this matter involves a

potential violation of a federal

criminal statute, I am requesting

that the DOJ review Mr. Sloan’s

testimony,” Waters said in a letter

to Attorney General William P.

Barr. The Justice Department de-

clined to comment.

Sloan’s attorney, Josh Cohen,

said in a statement: “The allega-

tion that Tim Sloan provided inac-

curate and misleading testimony

to the House Financial Services

Committee is completely un-

founded. Mr. Sloan described the

considerable efforts that Wells

Fargo made under his leadership

to comply with the consent orders

and directives of regulators. His

testimony to the C ommittee a bout

those efforts was truthful and in

good faith.”

Scharf told the committee that

he found that the details in the

House report confirmed his con-

clusion that the bank had been

poorly managed. “These matters

describe deeply disturbing con-

duct that is utterly unacceptable

and has no place in our company,”

Wells Fargo can

redeem itself,

new CEO declares

Third such assurance

in 3 years, from b ank’s

third chief in 3 years