After leaving yesterday’s Senate Banking Committee hearings, Wells Fargo Chief Executive Officer John Stumpf was blasted by both Democrats and Republicans over his handling of the scandal over the opening of more than 2 million unauthorised customer accounts as employees sought to achieve aggressive sales goals.
According to Bloomberg, Senator Elizabeth Warren reportedly told Stumpf: “You should resign. You should give back the money you took while this scam was going on and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission.”
Warren criticised Stumpf for pushing the blame to lower-level employees, saying: “It’s gutless leadership”.
Republican Patrick Toomey also told Stumpf: “This isn’t cross-selling, this is fraud.”
Wells Fargo agreed to pay $185 million to authorities including the Consumer Financial Protection Bureau after it was found that employees opened accounts and credit cards without customers’ authorisation. Stumpf said he was “deeply sorry” as he outlined a five-year timeline of efforts the bank made to prevent any misconduct.
He added: “The Wells Fargo board is actively engaged in this issue. The board has the tools to hold senior management accountable, including me and Carrie Tolstedt, the former head of our retail banking business. Any board actions taken with our named executive officers will be appropriately disclosed, and I want to be clear on this, I will respect and accept the decision of the board.”
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Democrat Senator Sherrod Brown told Stumpf that the bank’s response has been inadequate, and said: “For example Wells Fargo hasn’t yet calculated what effect lower credit scores resulting from the unauthorized accounts might have had on customers’ finances. Senior management downplayed the importance of the problem and continued to award performance bonuses to those involved as recently as two months ago”.
He added: “You would think the lessons of the financial crisis, which came at such a high cost to our country, would change the way banks do business.”
Wells Fargo said that in 2011, a dedicated team was put in place to monitor and filter out improper sales. The firm started terminating around 1,000 of its 100,000 retail banking employees annually for such violations. In 2012, the bank began lowering some sales goals for compensation. According to Stumpf, he first became aware that fake accounts were being opened in late 2013.
In 2015, an OCC review of Wells Fargo’s sales practices revealed shortcomings that prompted the agency to demand changes as well as requests for the bank to compensate customers for any damages that occurred.
In his testimony Strumpf said the bank did not inform the SEC about the matter as “it was not a material event.”
Senator Warren concluded: “In 2008, Wall Street promised change but it looks like it is business as usual. A giant bank cheats the little guys and the executives line their own pockets. Mr. Stumpf, you make it clear that Wall Street won’t change until we make it change.”
The House Financial Services Committee, led by Chairman Jeb Hensarling, said last week it is also planning to conduct its own investigation with a separate hearing scheduled for later this month.