The CEO of Wells Fargo apologized before harshly critical senators Tuesday for betraying customers’ trust in a scandal over allegations that employees opened millions of unauthorized accounts and moved money into them.
Advertisement
According to Bloomberg, Senator Elizabeth Warren reportedly told Stumpf: “You should resign”.
The same is true of two other mutual funds in Warren’s disclosures: TIAA-CREF Global Equities (where she holds between $250,001 and $500,000) and CREF Equity Index Account (where she holds between $50,001 and $100,000).
Warren’s office contended that the senator was actually acting against her best financial interests by taking on the bank. The lead up to the fiasco was “more elaborate”, but at its heart it was “about those mortgages, those subprime mortgages, that tricked people, that trapped people, that fooled people”.
Warren told Stumpf, “You squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket”.
Wells Fargo’s John Stumpf was hammered for a scandal in which millions of unauthorised accounts were opened and bonuses paid.
Senator Sherrod Brown, an Ohio Democrat, told the CEO that the bank’s response has been inadequate, and said, for example, that Wells Fargo hasn’t yet calculated what effect lower credit scores resulting from the fake accounts might have had on customers’ finances.
“So you haven’t resigned, you haven’t returned a single nickel of your personal earnings, you haven’t fired a single senior executive”, the Massachusetts Democrat said on Tuesday as the bank’s chief executive officer testified before the Senate Banking Committee.
Wells Fargo has always been known for its aggressive sales goals, but the details and the $185 million fine that regulators imposed last week have singed the consumer banking giant’s reputation as a well-run, tightly managed company removed from the reckless conduct on Wall Street that stoked the financial crisis. He promised to assist affected customers.
The bank has in place executive compensation clawback provisions that the board could implement.
The bank had announced in July that Tolstedt was retiring.
Under the settlement with regulators, Wells Fargo neither admitted nor denied the allegations.
“I want to make it very clear that we never directed nor wanted our team members to provide products and services to customers that they did not need or want”.
“We recognize now that we should have done more sooner”, he acknowledged.
Committee Chairman Sen. Richard Shelby, R-Ala., said as the hearing began that there are many unanswered questions, including when the misconduct started, how much top executives knew about it and why did federal regulators wait until this year to crack down. Stumpf said he was “deeply sorry” as he outlined a five-year timeline of efforts the bank made to prevent any misconduct.
“If there were ever a textbook case where consumers needed protecting, this was it”, Shelby said.
Wells Fargo, familiar to customers for its stagecoach logo, had also always been known in the banking industry for its aggressive sales goals.
Sen. Bob Corker of Tennessee said it would be “malpractice” if the bank doesn’t institute the compensation clawbacks, and Stumpf said the board “has the tools to hold senior leadership accountable”, including himself and Tolstedt.
Wells Fargo said it pay a total of $5 million, and possibly more if necessary, in refunds to customers harmed by the practices.
In prepared testimony obtained by The Associated Press, Chief Executive John Stumpf says he is “deeply sorry” the bank failed to meet its responsibility to customers and didn’t act sooner to stem what he called “this unacceptable activity”.
Advertisement
In his testimony Strumpf said the bank did not inform the SEC about the matter as “it was not a material event”.
