Wells Fargo’s longtime chief executive endured more than two hours of stiff questioning during a Senate hearing Tuesday, as his attempt to apologize for a scandal involving millions of sham accounts reignited anger over whether the big banks are being held accountable for their misdeeds.
In the crowded hearing room, John G. Stumpf acknowledged that he and other senior executives should have realized the extent of the problem earlier and taken firmer action. But he was repeatedly chastised by lawmakers who took him to task for the bank’s unwillingness to punish senior executives for misconduct that resulted in $185 million in fines and the firing of some 5,300 front-line employees.
For industry officials hoping to move beyond the populist anger generated by taxpayer bailouts of banks, the hearing was reminiscent of those following the 2008 financial crisis, when several executives were hauled before Congress.
In one blistering exchange, Sen. Elizabeth Warren (D-Mass.) demanded that Stumpf explain why he had not offered to give up any of his compensation — he made $19 million last year — or resign in the wake of the scandal. She noted that Stumpf repeatedly touted Well Fargo’s ability to sell more and more products to customers in calls with analysts, and then watched as investors pushed up the bank’s stock price, helping boost his own holdings by about $200 million over several years.
“Have you returned one nickel of the money that you earned while this scandal was going on? Have you fired any senior management, the people who actually oversaw this fraud?” Warren asked.
“No,” Stumpf said.
“Evidently your definition of accountable is to push the blame to your low-level employees who don’t have the money for a fancy PR firm to defend themselves,” Warren said. “It is gutless leadership. You should resign; you should give back the money.”
The exchange quickly made the rounds on Twitter, marking an embarrassing moment for one of the banking industry’s longtime veterans. Stumpf has long cultivated a folksy image in the financial world, emphasizing his upbringing on a dairy farm and the bank’s strong reputation as a community institution above the Wall Street fray. (He showed up to the hearing Tuesday with his right wrist in a splint and bandage, an injury he apparently incurred while playing with his grandchildren.)
Warren was hardly the only lawmaker to chastise Stumpf or urge him to resign, as criticism came from both sides of the aisle.
“I have often said that banking is based on trust, and that trust was broken at Wells Fargo,” Sen. Richard C. Shelby (R-Ala.), chairman of the Senate Banking Committee, said during the hearing.
The hearing served notice that passions still run strong over how to regulate the financial industry. Both Democratic nominee Hillary Clinton and her Republican rival, Donald Trump, have been critical of Wall Street, although they have vastly different approaches to addressing the perceived problems.
Wells Fargo has been in lawmakers’ crosshairs since acknowledging earlier this month that some of its employees created as many as 2 million fake accounts — from credit cards to checking accounts — to meet sales goals. In some cases, Wells Fargo customers faced various fees for accounts they did not request, or bank employees took money from an authorized account to create a fake one.
The San Francisco-based bank fired 5,300 employees between 2011 and 2016 for the scheme, including some branch managers, “managers of managers,” and at least one regional bank president, Stumpf said. He said the bank had begun to look at whether the conduct could have occurred before 2011, he said.
“I want to apologize for violating the trust our customers have invested in Wells Fargo,” Stumpf said. “And I want to apologize for not doing more sooner to address the causes of this unacceptable activity.”
Wells Fargo’s case has become a new flash point in the debate over whether, eight years after the Great Recession, U.S. regulators are doing enough to punish Wall Street for its transgressions. Clinton said in a letter to Wells Fargo customers Tuesday that the bank’s conduct was “outrageous.” Sen. Bernie Sanders of Vermont said in a Twitter post: “How many people at Wells Fargo are going to jail? Zero. But if you smoke marijuana in this country, you get a criminal record.”
Wells Fargo executives were probably hoping that the hearing, even if tough, would help them move beyond the matter. Wells Fargo has already refunded $2.6 million to customers who were improperly charged fees, and it said it would contact others to see if they had been wrongly signed up. At the same time, the bank announced last week it would eliminate the aggressive sales goals that former employees and regulators said led some to break the rules.
But lawmakers noted that the bank has not addressed the damage that may have been done to people’s credit scores. A late fee on an account a customer did not know about or an unauthorized credit card could also make it more difficult or expensive for someone to get a mortgage, they said. Also, some former Wells Fargo employees said they were fired for not meeting the sales goals the bank now says it will eliminate.
One of the most contentious issues was whether the company’s top executives should return some of their bonuses. In particular, lawmakers took aim at Carrie Tolstedt, the former head of the unit overseeing the branch operation.
Earlier this year, Tolstedt was told that the company was “going in a different direction,” in part because of the misconduct discovered in her unit, Stumpf said. Tolstedt then opted to retire in July.
But lawmakers were peeved by reports that Tolstedt, a 27-year veteran of the bank, could leave with tens of millions in compensation.
“So, 5,300 team members, earning perhaps $30,000 a year, have lost their jobs, while Ms. Tolstedt walks away with $100 million, give or take,” said Sen. Sherrod Brown (Ohio), the ranking Democrat on the committee.
Stumpf himself acknowledged for the first time Tuesday that he only learned of the problem in 2013, about the time the scandal first surfaced in a Los Angeles Times news account. But that just drew more recriminations from lawmakers.
Stumpf repeatedly was asked whether, as CEO and chairman of the board, he would recommend that executives return some of their compensation, but he said he would not interfere with the compensation committee’s deliberations.
“I will accept and respect the decision of the board,” he said.
That annoyed lawmakers even more.
“You keep saying, ‘the board, the board,’ as if they are strangers you met in a dark alley,” Warren said. “Why can you not make a change here?”