John Stumpf, chief executive of Wells Fargo & Co., swears in to a House Financial Services Committee hearing in Washington on Thursday, Sept. 29, 2016. (Andrew Harrer/Bloomberg)

Wells Fargo announced Wednesday that its longtime chief executive and chairman, John G. Stumpf, is stepping down, the latest turn for the embattled megabank after it admitted that thousands of low-level employees had set up sham accounts to meet sales quotas.

Stumpf’s sudden downfall is likely to send shivers through Wall Street where a well-honed playbook for surviving public scandals appears to have been torn to pieces, upended by the type of populist anger that has fueled the rise of Republican Donald Trump and Sen. Bernie Sanders (D) on this year’s presidential campaign trail.

The San Francisco-based bank has repeatedly apologized and said it had fired 5,300 employees for misconduct and put in place more stringent internal controls. But that has not been enough for regulators and lawmakers, including Sen. Elizabeth Warren (D-Mass.), who called on him to resign. Stumpf went as far as pledging to give up $41 million in compensation to account for the scandal, but his overture did little to quiet critics.

“While I have been deeply committed and focused on managing the Company through this period, I have decided it is best for the Company that I step aside,” Stumpf said in a statement.

Tim Sloan, another long-time Wells Fargo executive, will take over Stumpf’s duties as CEO. A board member, Stephen Sanger, will now serve as chairman, effectively dividing power that had previously been consolidated under Stumpf. Sanger is the former chief executive of General Mills.

[What we know about Tim Sloan, the new CEO of Wells Fargo.]

“It’s sad day for Wells Fargo. John Stumpf was a successful leader for his entire career” notwithstanding the recent controversy, Sloan said in an interview. “He did the right thing for Wells Fargo by putting the company first and himself second.”

“I wish the transition was happening” under different circumstances, Sloan added. “I am going to do the right thing by repairing the reputation of the company.”

Stumpf’s downfall began in early September when Wells Fargo was fined $185 million by regulators after it discovered that thousands of employees were setting up unauthorized accounts, including credit cards and checking accounts, customers had not requested. In some cases, the customers were charged various fees for accounts they did not know existed. In others, bank employees would take money from authorized accounts to gain credit for setting up fake ones.

The company initially attempted to downplay the problem, noting that the 5,300 employees fired over five years totaled only a small portion of its workforce. But that just stoked lawmakers’ anger and the scandal continued to grow. Federal prosecutors are now considering criminal or civil charges against the company, the Labor Department is investigating whether it illegally fired employees who reported the wrongdoing and several cities and states, including California, have said they would no longer do business with the bank.

Stumpf will not receive a severance package as part of his retirement. But he has accumulated $137.1 million in company stock, deferred compensation and a pension, according to Equilar, a research firm. His departure is a stunning end to the career of one of the financial industry’s most-storied executives. He developed a reputation as a community 41banker in a hyper-competitive world of exotic financial instruments and large market bets. Even as Wells Fargo’s assets crept toward $2 trillion under his leadership, making it one of the largest financial institutions in the country, Stumpf often recalled his upbringing as one of 11 children on a dairy and poultry farm to explain his philosophy for ethical banking.

That didn’t help him during two congressional hearings last month in which lawmakers pummeled him for hours over the scandal. Several lawmakers called for Stumpf to step down and others said he should be criminally prosecuted.

In a tense exchange, Senator Elizabeth Warren badgered Wells Fargo CEO John Stumpf on why he had not offered to give up any of his compensation or to resign in the wake of the fake accounts controversy. (Reuters)

Stumpf’s retirement is surprising given that other CEOs, especially in the financial industry, have been able to weather scandals of a similar scale, said Carl Tobias, a professor at University of Richmond School of Law.  “We rarely see people stepping down. It is quite extraordinary,” he said. But the executive likely felt he didn’t have a choice, said Tobias. His retirement spares Wells Fargo’s  board a painful decision, he said.

It is unclear whether replacing Stumpf with another long-time company insider will be enough to convince investors that the company is moving in the right direction. Sloan is a 29-year veteran of the company and currently serves as president and chief operating officer. He also worked closely with with Carrie Tolstedt, who led the bank’s community banking unit where the misconduct occurred. Lawmakers were critical of Wells Fargo for not firing Tolstedt and allowing her to retire with millions in salary and bonuses.

“Unfortunately, Mr. Stumpf’s retirement does nothing to answer the many questions that remain,” said Sen. Sherrod Brown (D-Ohio), the ranking Democrat on the Senate Banking Committee. “We are still waiting for answers as to how Wells Fargo plans to right its wrongs against customers and the low-paid employees who weren’t given the benefit of a retirement package when they were fired for refusing to cheat.”

Added Warren: “If Mr. Stumpf is leaving with all of his ill-gotten millions that’s still not real accountability. A bank teller would face criminal charges and a prison sentence for stealing a handful of 20s from the cash drawer.”

In an interview, Sloan said he was confident that he would be successful in his new role. “We want to make sure that we have good relationship with elected officials, but they are not the primary stakeholders of this company. We are in the banking business, our primary focus in the banking business is to serve our customers,”  he said.

Shortly before Wednesday’s announcement about the leadership shake-up, Wells Fargo sent customers an email outlining several steps it was taking to address the past problems, including a promise to send out a confirmation letter any time an account is opened in a customer’s name.

“We are deeply committed to serving you and your financial needs, and in those instances, we did not live up to our commitment,” the email said. “It’s important for you to know that making things right and restoring the faith you have in us is the very top priority for our entire Wells Fargo leadership team,” the email added.

Michelle Williams and Jonnelle Marte contributed to this story.

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