Stumpf told the Senate Banking Committee he has told his managers to do “whatever it takes” to make customers whole, refunding fees or compensating them for damage to their credit ratings.
Advertisement
Wells Fargo, one of the largest six US banks and one that came away from the 2008 financial crisis least scathed, earlier this month was fined $185 million by the nation’s consumer protection agency for fraudulently opening over two million unauthorized consumer credit card and savings accounts.
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. Wells Fargo has already fired more than 5,000 employees in connection with the fraud – but more than 90 percent of those fired were ranked lower than branch manager. A bank representative says he injured himself playing with his grandchildren.
“The 5300 were dishonest, and that is not part of our culture”, Stumpf said.
In an uncommon display of bipartisan unity, lawmakers on the Senate banking committee condemned Wells Fargo & Co. chief executive John Stumpf on Tuesday for the bank’s failure to prevent abusive sales tactics and its perceived reluctance to hold senior executives accountable for widespread scheme that led to a $185 million settlement earlier this month.
“Seriously?” replied Sen. Elizabeth Warren (D-Mass). Elizabeth Warren, D-Mass., demanded that Stumpf explain why he had not offered to give up any of his compensation – he made $19 million a year ago – or resigned in the wake of the scandal. “This is gutless leadership”. “A cashier who steals a handful of $20s is held accountable, but Wall Street executives nearly never hold themselves accountable, not now and not in 2008 when they crushed the worldwide economy”. “You should resign”, Warren said at the end of a near-monologue about the broader failures of the banking system.
“You should resign. You should give back the money you took while this scam was going on, and you should be criminally investigated”, she said.
The executive touted Wells Fargo’s success at cross-selling in a dozen calls with investors, said Warren. But he acknowledged the bank should have acted sooner to fix the problems.
“We never directed nor wanted our employees, whom we refer to as team members, to provide products and services to customers they did not want or need”, the Times quoted Stumpf as saying.
The senators challenged assertions that Stumpf and other Wells Fargo senior executives didn’t become aware of the problems until 2013 – when the sales misconduct was reported by The Los Angeles Times. She said, proceeding to read the CEO a series of his own quotes.
She asked Wells Fargo Chairman and executive what he has actually done to answer to the fraud of the fake accounts.
“Your definition of accountable is to push the blame on low-level employees” who can’t afford to fire an expensive public relations firm to protect the bank’s reputation”, she said.
“Senator Warren didn’t consider and isn’t concerned with whether her taking CEO John Stumpf to task for his handling of Wells Fargo’s fraud might negatively affect the value of her mutual funds”, said Warren’s press secretary, Lacey Rose, in a statement. But he noted changes the bank has made to prevent similar behavior in the future, such ending sales goals for retail bankers starting next year.
But lawmakers were peeved by reports that Tolstedt, a 27-year veteran of the bank, could leave with tens of millions in compensation.
Advertisement
The debate over Tolstedt’s pay comes as the Federal Reserve, Securities and Exchange Commission and other regulators finalize revised “clawback” rules proposed in April that would require large financial institutions to adopt policies allowing them to take back executives’ incentive-based pay in misconduct cases.
