“In March 2012, the OCC received a small number of complaints from consumers and bank employees alleging improper sales practices at Wells Fargo, which were forwarded to OCC supervision staff”, Curry explained in detailed prepared remarks, adding that the agency then met with executive leadership following the Los Angeles Times story in December 2013. “Mr Stumpf, you are the chairman of the board”.
Advertisement
But Wells Fargo’s problem may be resonating more because it involves regular bank accounts for regular people who faced unjustified fees, rather than arcane derivatives traded by sophisticated investors.
Today’s target, Wells Fargo CEO John Stumpf who is under the glare of Congressional scrutiny after regulators punished his bank for inflating its sales numbers with thousands of phony customer accounts.
Peppered with criticism for almost three hours at a hearing Tuesday, the CEO of the nation’s second-largest bank faced calls for his resignation from harshly critical senators.
“While this scam was going on, you personally held an average of 6.75 million shares of Wells Fargo stock”, Warren said.
For Jaret Seiberg, analyst at Cowen Washington Research Group, the hearing reinforced his assertion that the market under-appreciates the risk that Congress over the next few years may take steps to restructure or break up the biggest banks.
The bank’s board of directors is examining what action it should take against company executives, Stumpf told the committee.
The scandal has resulted in $185 million in fines, a commitment to set aside $5 million to reimbursement customers who were charged fees on the fraudulent accounts, the firing of 5,300 employees, the installation of independent overseers at the bank, and new procedures including a requirement for employees to get signatures of credit-card applicants and to obtain customer confirmation before new accounts are created.
As part of the sharp questioning, Stumpf was pressed on whether Wells Fargo employees committed fraud, and Sen. “They could end up in prison”, Warren said in her closing statement. Tolstedt and other top executives should be forced to give back some of their compensation, they said.
In two turns behind the microphone, Warren, of MA, excoriated Stumpf, repeating questions to try to get him to answer them, turning the bank’s own words against him, and using the opportunity to make a moral case for banking reforms.
Stumpf said he is not a member of the board’s compensation committee and would not recommend a clawback for Tolstedt.
Peppered with criticism for hours, Stumpf at one point stumbled a bit over his words and bristled at Warren’s suggestion that the sales practices were a “scam”.
“You’re right, it is all in the public records, because I looked it up”, Warren replied. Warren quickly cut him off, citing transcripts for 12 quarterly earnings calls from the three years in which the scam was ongoing. She announced in July that she would retire from the bank this year and is expected to leave with as much as $125 million in salary, stock options and other compensation.
Stumpf, who has been at Wells Fargo for more than 30 years, repeatedly apologized for letting down customers.
“Banks and fish rot from the head down”, said William K. Black, an economics and law professor at the University of Missouri-Kansas City and a former bank regulator of note during the savings and loan crisis of the 1980s, labeling the settlement with Wells Fargo “disgustingly weak” given management intransigence. “If it was you wouldn’t need to squeeze your employees so hard”, she said.
Advertisement
Multiple senators wanted to know whether Stumpf believed Wells Fargo should rescind, or “claw back”, some of the compensation owed to Stumpf and Carrie Tolstedt, the longtime executive who ran the bank’s consumer banking unit that oversaw numerous sales practices.
