House Lawmakers Heap Blistering Criticism on Wells Fargo CEO5:54:00 AM
Angry lawmakers heaped another round of blistering criticism on Wells Fargo’s CEO, pressing today for details about what senior managers k...
Chief Executive John Stumpf, newly stripped of tens of millions in compensation, told the House Financial Services Committee that the bank is expanding its review of accounts and will evaluate executives’ roles. But as during the grilling he received last week from a Senate panel, Stumpf remained on the defensive.
“Fraud is fraud. Theft is theft,” committee head Rep. Jeb Hensarling, R-Texas, told Stumpf.
The panel’s senior Democrat, Rep. Maxine Waters of California, was adamant that the alleged abuses show that the second-largest U.S. bank is too big for senior executives to keep track of what’s going on. “I have come to the conclusion that Wells Fargo should be broken up,” she said.
Stumpf reiterated his previous words, that he was “deeply sorry.” He said the bank was looking at accounts further back, to 2009, and that an inquiry by Wells Fargo’s outside directors will review executives’ roles “across the board.”
U.S. and California regulators have fined San Francisco-based Wells Fargo $185 million, saying bank employees trying to meet sales targets opened up to 2 million fake deposit and credit card accounts without customers’ knowledge. Regulators said they issued and activated debit cards, and signed people up for online banking without permission. The abuses are said to have gone on for years, unchecked by senior management.
Stumpf finally shared some basic information about the potential victims, saying those affected skewed to younger Wells customers. When questioned by lawmakers, Stumpf also gave some state-by-state breakdowns, including for Georgia, Delaware, Texas, Kentucky, Pennsylvania and Missouri. When asked by The Associated Press for a complete state-by-state count, a Wells spokeswoman declined to share that information.
The bank says customers already have been refunded $2.6 million in fees from unauthorized products.
Wells Fargo also was hit with more penalties today. The Justice Department and the Office of the Comptroller of the Currency announced a total of $24.1 million in civil penalties against the company for alleged violations of a law intended to protect military service members from predatory financial practices.
The OCC, a division of the Treasury Department, said its $20 million penalty is for Wells Fargo’s failure to honor an interest cap and other violations. In a settlement with the Justice Department, the bank is paying $4.1 million to resolve allegations it repossessed 413 cars owned by service members without obtaining court orders.
For more than five hours today, Stumpf came under a sustained assault from lawmakers. He insisted that Wells Fargo had taken actions prior to 2013 to bolster its legal compliance and maintain high ethical standards. He bristled at depictions of the culture of Wells Fargo — a 164-year-old bank with origins in the California gold rush — as elevating sales and profits to lure investors at the expense of ethics.
“This is the behavior of people that we found, that we did not want,” Stumpf insisted.
Many of the angry lawmakers said they hold accounts with Wells Fargo or have taken out mortgages. “If I could, I’d pay it back,” said Hensarling.
Republican Rep. Patrick McHenry, who represents North Carolina — where Wells has a large presence due to its purchase of Wachovia in 2008 — was particularly incensed. “You have broken long-standing ethical standards inside the company,” McHenry said.
Stumpf noted new leadership at the retail bank business and the accelerated elimination of sales goals. He said about 10 percent of the 5,300 fired employees were branch managers, while others terminated were above that level, supervising the branch managers.
He also cited the compensation he must return. The Wells Fargo board said it is stripping Stumpf and the executive who ran the retail banking division of millions of dollars in pay. Stumpf, who earned $19.3 million last year, will forfeit $41 million in stock awards. He also is giving up any bonuses for this year.
Members of Congress also raised question whether other banks had similar aggressive sales cultures. “We have Wells Fargo before me, but I don’t think you should be alone in this joyous experience,” said Rep. Brad Sherman, D-California.
Stumpf insisted customers’ loyalty to Wells Fargo remains as strong as ever. He also defended his dual roles as chief executive and chairman, positions that some critics have suggested should be split.
Members of Congress pushed Stumpf on when he informed Wells Fargo’s board about the sales practice scandal, and whether Wells may have violated Securities and Exchange Commission regulations by not informing investors.
Wells Fargo’s largest shareholder is Warren Buffett’s Berkshire Hathaway, and Stumpf said today that he’s had one phone conversation with Buffett since the bank was fined. Buffett has praised Stumpf in the past, but still isn’t saying much publicly. He’s said he doesn’t plan to until November, when he is required to file a quarterly update on its stock portfolio.
Rep. Carolyn Maloney, a New York Democrat, asked Stumpf about his personal sales of company shares at a time when she said he apparently had learned about the fake-account sales practices. Stumpf said he sold the stock with the proper ethics approvals and “with no view” of any misconduct at the bank.
Stumpf also said Wells did not put language in their regulatory filings until this summer, three years after a Los Angeles Times investigation and a year after a Los Angeles City Attorney’s lawsuit.
The consumer banking giant, which is also the biggest U.S. mortgage lender, fired about 5,300 employees starting in 2011 in connection with the sales practices. Stumpf said all of the terminated employees were fired because of unethical conduct — not because they failed to meet sales goals.
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