The Washington playbook for a company in crisis starts with a simple premise: Friends aren’t free. That’s why a big business facing a crush of damaging headlines typically beefs up its lobbying team and spreads more political money around.
Wells Fargo is doing the opposite. On Friday — the same day federal regulators hit it with a $1 billion civil penalty for ignoring years of problems in its auto and home-lending businesses — the bank reported its lowest spending on lobbying in nine years. It shelled out $670,000 for the first three months of the year (Citigroup, a smaller bank, spent nearly twice that amount in the same period). And its political action committee reported its lowest quarterly collections in three years, dating back to before the eruption of the fake account scandal that started the bank’s headaches.
Bank officials say Wells Fargo is in the midst of reorganizing its approach to Washington. That process started a year ago when the company installed David Moskowitz, a 24-year veteran executive, atop the lobbying team. Hardly a splashy Washington name, he most recently had led the consumer lending and corporate regulatory division of Wells Fargo’s law department.
Moskowitz’s mission has focused in part on shoring up Wells Fargo’s in-house team while reevaluating its stable of contract lobbyists. But the effect so far has been changes largely at the margins.
That approach continues what several industry sources describe as Wells Fargo’s traditionally hands-off attitude toward Washington — a strategy they say underestimates the gravity of the company’s ongoing challenges. “They still think they’re America’s bank, that they need technical help and not high-end political help,” one source familiar with the bank’s operations says. “They are not well positioned to protect themselves. And it’s only going to get worse for them as a result.”
Most immediately, Wells Fargo is seeking an extension from the Office of the Comptroller of the Currency for updating its anti-money laundering controls, the Wall Street Journal’s Emily Glazer reported Sunday. Failure to meet that June 30 deadline could earn it another enforcement action. And beyond last week's billion-dollar settlement, the bank is still operating under a February order from the Federal Reserve forbidding it to grow past its size at the end of last year.
Wells Fargo executives will face more heat today at the bank’s annual shareholder meeting. In addition to rendering a judgment on the board of directors, shareholders will also vote on a number of proposals billed as accountability measures. Separately, the revelation Monday that CEO Tim Sloan earned some 291 times the median income of a Wells Fargo worker in 2017 — $17.6 million — drew angry responses from some employees. And California State Treasurer John Chiang on Monday called for Sloan’s removal.
"Wells Fargo has already taken steps aimed at preventing future scandals, including installing new management, revamping its board of directors, reforming its notorious sales goals and clawing back executive pay," CNN Money's Matt Egan writes. "The new board, led by former Fed official Elizabeth Duke, has also attempted to improve its risk management — a major lapse that contributed to the fake account scandal."
Recent moves in the Wells’ Fargo’s Washington makeover include adding a trio of staffers: Beth Zorc, a former Senate Banking Committee lawyer and acting general counsel at the Department of Housing and Urban Development now heading up the bank’s public policy team; Eric Hoplin, formerly the executive director of the Financial Services Roundtable, now the bank’s liaison to trade associations and other third-party groups; and Shannon Aimone, the bank’s political point person, who most recently ran JPMorgan Chase’s PAC. The three aren't registered to lobby.
“Wells Fargo has a history of engaging policymakers on issues important to the U.S. economy, the financial services industry and our customers,” Wells Fargo spokeswoman Jennifer Dunn said in a statement. “At this important time of rebuilding trust, Wells Fargo continues to be committed to keeping policymakers informed and we will adjust our balance of internal and external government relations resources as needed.”
Attrition has helped trim the bank's lobbying bill. Internally, Anita Eoloff, the former head of government relations retired last year after 23 years with the company; and Chris Rosello left for a job at HSBC. Externally, the Podesta Group — which the bank paid $550,000 last year alone, its heftiest contract — collapsed late last year. But in one sign Wells Fargo is nosing toward stepping up its profile, CEO Tim Sloan recently joined the Financial Services Forum, a reconstituted trade group for big bank chiefs that Wells Fargo quit two years ago.
It hasn't been all bad news out of Washington for the nation's third-largest bank: A lowered tax bill has helped cushion the blow of its ten-figure penalty. “Just in the first quarter, Wells Fargo’s effective tax rate fell from about 28 percent to 18 percent, saving it more than $600 million,” The Post’s Renae Merle wrote Friday. “For the entire year, the tax cut is expected to boost the company’s profits by $3.7 billion.” Wells Fargo shares are up 2 percent since Friday.
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— Stocks wobble. AP's Marlen Jay: "U.S. stocks couldn’t hang on to an early gain and finished mostly lower Monday as technology companies slipped... Investors once again focused on corporate deals Monday as utility company Vectren agreed to be bought by CenterPoint Energy for $6 billion, while the CEO of Sears called for the company to sell more assets and health care products company Henry Schein said it will split off its animal health unit. Aluminum producers tumbled after the Treasury Department moved to ease sanctions against Russian aluminum company Rusal."
— 10-year inches from 3 percent. CNBC's Thomas Franck and co.: "The yield on the benchmark 10-year Treasury note started the week on a tear, jumping to 2.99 percent and toying with the key 3 percent level that could trigger a reaction across global financial markets. The 10-year yield was at 2.973 percent at 4:00 p.m. ET, after hitting 2.998 percent earlier Monday, its highest level since January 2014. The yield on the 30-year Treasury bond was higher at 3.143 percent. Yields move inversely to bond prices. The benchmark for mortgage rates and other financial instruments has jumped in April on signs of increasing inflation and as the Federal Reserve signaled more rate increases are to come this year."
— Fourth rate hike? CNBC's Jeff Cox: "The market is finally coming around to the idea that the Federal Reserve this year will be raising interest rates a total of four times. Though some big forecasting firms on Wall Street for months have been predicting a more aggressive Fed, traders thus far had been anticipating three moves this year — the increase already approved in March, plus two more, likely in June and September. However, the fed funds futures market Monday morning gave almost a 50 percent probability that the central bank would move one more time in December... The probability had been just 33 percent a month ago and less than 40 percent as of late last week."
— WH makes NAFTA push. WSJ's William Maudlin and Siobhan Hughes: "The Trump administration is pushing hard to finish talks on the North American Free Trade Agreement over the next two weeks and is considering bare-knuckle tactics to get Congress to approve a new deal... Trump has repeatedly signaled his willingness to withdraw from Nafta entirely if he doesn’t get a renegotiated deal he deems more favorable to American workers. The administration used the same strategy to bring Canada and Mexico to the table. But some in Congress—especially members of the GOP—say they are prepared to resist the approach if it is turned on them. 'I have advised them very unambiguously that would be a very bad strategy for the administration to pursue,' said Sen. Pat Toomey (R-Pa.), who has been talking to White House officials."
Trump renews border threat. The Post's John Wagner and David Lynch: "Trump renewed a threat Monday to make tighter control of the southern border a condition of broad trade deal that his administration is renegotiating with Canada and Mexico." Here's his tweet:
Mexico, whose laws on immigration are very tough, must stop people from going through Mexico and into the U.S. We may make this a condition of the new NAFTA Agreement. Our Country cannot accept what is happening! Also, we must get Wall funding fast.— Donald J. Trump (@realDonaldTrump) April 23, 2018
"The president voiced similar concerns earlier this month, claiming that Mexico is doing little to stop the flow of illegal immigrants and drugs into the United States and suggesting that he could use [NAFTA] as leverage on those issues," they write. "Trump’s latest threat comes as trade negotiators are already grappling with thorny issues amid a rush to conclude at least the outlines of a deal in the next few weeks — a process that could be upended if Trump is serious about adding a border-crossing condition."
Mexico dismissed the threat. Mexican Foreign Minister Luis Videgaray called Trump's demand "unacceptable."
— Bernie's big jobs plan. The Post's Jeff Stein: "Sen. Bernie Sanders (I-Vt.) will announce a plan for the federal government to guarantee a job paying $15 an hour and health-care benefits to every American worker 'who wants or needs one,' embracing the kind of large-scale government works project that Democrats have shied away from in recent decades. Sanders's jobs guarantee would fund hundreds of projects throughout the United States aimed at addressing priorities such as infrastructure, care giving, the environment, education and other goals. Under the job guarantee, every American would be entitled to a job under one of these projects or receive job training to be able to do so, according to an early draft of the proposal. A representative from Sanders's office said they had not yet done a cost estimate for the plan or decided how it would be funded, saying they were still crafting the proposal."
— GOP aims for spending deal. Politico's John Bresnahan and Burgess Everett: "Trying to avoid another debacle over government spending — this time in an election year — House and Senate Republican leaders are pushing for quick action on annual appropriations bills. With Sen. Richard Shelby (R-Ala.) taking over the Senate Appropriations Committee, members of that panel were scheduled to hold a private meeting Monday to discuss ways to move spending bills quickly to the Senate floor... Shelby and Sen. Patrick Leahy (D-Vt.), the ranking member on Appropriations, also want to meet with Majority Leader Mitch McConnell (R-Ky.) and Minority Leader Chuck Schumer (D-N.Y.) later this week to try to hash out a plan for moving the bills."
— Pass-through break benefits the rich. NBC's Jonathan Allen: "The wealthiest Americans will benefit the most from... Trump's tax deduction for owners of "pass-through" businesses, according to a congressional report released Monday. The deduction, which ranges up to 20 percent, will shower $40.2 billion in tax breaks on owners of pass-throughs — largely businesses owned by an individual or a partnership, or those 'S' corporations that kick income and losses to shareholders for tax purposes — in 2018... The lion's share of the benefit — $17.4 billion, or 44.3 percent of the total — will go to roughly 200,000 Americans making $1 million or more who claim the pass-through deduction."
— Mortgage deduction finds fewer takers. WSJ's Richard Rubin: "Meet the new mortgage-interest deduction. It’s smaller and much more concentrated among high-income households. In 2018, the deduction will save taxpayers $25 billion, down from $60 billion in 2017, according to estimates released on Monday by the Joint Committee on Taxation, the official analysts of tax policy for Congress. That’s largely because of the way last year’s tax law change altered the standard deduction. The much higher standard deduction means that far fewer taxpayers will itemize their deductions."
— Deutsche Bank weighs restructuring. Bloomberg's Steven Arons and Eyk Henning: "Barely two weeks into the job, Deutsche Bank AG’s Chief Executive Officer Christian Sewing is considering a retreat that could mark the end of the bank’s two-decade quest to compete with Wall Street. Sewing is weighing extensive cuts to the lender’s cash equities business in the U.S. and may announce details as part of a wider restructuring of its investment bank when he reports earnings on Thursday... Such a move, if it happens, would effectively signal a sharper focus on the lower-risk business of private and commercial banking in its European home market."
— Alphabet soars. The Post's Hamza Shaban: "Google, which dominates online advertising, continues to thrive amid escalating threats of regulation in Washington and a wider backlash against Silicon Valley and widespread data collection. In the first quarter, Google parent company Alphabet's net income grew by 73 percent, totaling about $9.4 billion. Revenue rose 26 percent to $31 billion from $25 billion last year, beating analyst estimates. Alphabet's stock climbed upward nearly 1 percent in aftermarket trading. Google is expected to command more than 37 percent of the U.S. digital ad market, at about $40 billion this year, continuing its dominance."
How regulation favors Facebook, Google. NYT's Daisuke Wakabayashi and Adam Satariano: "[It] could begin playing out next month, when Europe enacts sweeping new regulations that prioritize people’s data privacy. The new laws, which require tech companies to ask for users’ consent for their data, are likely to hand Google and Facebook an advantage. That’s because wary consumers are more prone to trust recognized names with their information than unfamiliar newcomers. And the laws may deter start-ups that do not have the resources to comply with the rules from competing with the big companies."
— Amazon's robot plans. Codename: "Vesta." Bloomberg's Mark Gurman and Brad Stone: "The retail and cloud computing giant has embarked on an ambitious, top-secret plan to build a domestic robot... The Vesta project originated a few years ago, but this year Amazon began to aggressively ramp up hiring... People briefed on the plan say the company hopes to begin seeding the robots in employees’ homes by the end of this year, and potentially with consumers as early as 2019, though the timeline could change, and Amazon hardware projects are sometimes killed during gestation." (Amazon's owner, Jeff Bezos, also owns The Post.)
— SCOTUS splits on in-house judges. Reuters's Andrew Chung: "U.S. Supreme Court justices on Monday appeared divided over a challenge to the constitutionality of the Securities and Exchange Commission’s selection of in-house judges to enforce investor protection laws in a case involving a former radio host and investment adviser backed by the Trump administration. The court heard arguments in an appeal by Raymond Lucia, who was given a lifetime ban from investment-related work by an SEC administrative law judge for misleading investors in his 'Buckets Of Money' retirement wealth presentations. The case could expand the control by the president and political appointees over officials in various federal agencies."
- The Senate Finance Committee holds a hearing on early impressions of the tax law.
- The Heritage Foundation holds an event on how congress governs the Federal Reserve.
- Legislators and regulators will address bank leaders at the ABA Summit on Tuesday and Wednesday.
- The House Appropriations Subcommittee on Transportation, Housing and Urban Development and Related Agencies holds a hearing on the Office of Housing and Federal Housing Administration’s 2019 budget on Wednesday.
- The House Financial Services Subcommittee on Housing and Insurance holds a hearing on “HUD’s Role in Rental Assistance” on Wednesday.
- The U.S. Chamber of Commerce holds the 12th Annual Capital Markets Summit on Thursday.
- The House Financial Services Committee holds a hearingon oversight of the SEC’s corporation finance division on Thursday.
- SEC chairman testifies before the House Appropriations Subcommittee on Financial Services and General Government on Thursday.
- The Heritage Foundation holds an event on crowdfunding on Thursday.
- The House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection holds a hearing on reform of the CFIUS review process on Thursday.
The Senate Foreign Relations Committee voted to endorse Mike Pompeo, President Trump’s nominee for secretary of state:
Stephen Colbert on President Trump's weekend Twitter rampage: