The 2008 financial collapse was eight years ago this month — and the big banks are back to their old shenanigans.
Venerable Wells Fargo has engaged in behavior that would have made a robber baron blush: It pressured low-wage workers with unrealistic sales targets, so these workers created 2 million bogus accounts over five years, causing customers to be hit with fees and damage to their credit ratings. Some 5,300 workers have been fired and $185 million in penalties assessed to the bank, but not a single high-level executive has been sacked or even forced to give back the tens of millions of dollars in pay earned based on the fraud.
When Wells Fargo chairman and chief executive John Stumpf sat before the Senate Banking Committee on Tuesday, he represented a bank too big to fail, too sprawling to manage and too arrogant to own up to its failures.
Can’t Wells Fargo take back some of the executive payouts?
“I’m not an expert in compensation,” Stumpf said.
Would he commit to investigate whether the fraud began in earlier years?
“I can’t tell you that today.”
Did he learn about the fraud before reading about it in the Los Angeles Times?
“I don’t remember the exact time frame.”
Did the bogus accounts hurt customers’ credit scores?
“I don’t know the algorithms.”
Stumpf informed the senators that what Wells Fargo did “was not a scam,” disputed that “this is a massive fraud,” and said he had no idea “why people did this.”
Sen. Jerry Moran (R-Kan.) encouraged Stumpf to “make certain that the employees are not the scapegoat for behavior at higher levels.”
Stumpf repeated that “the 5,300, for whatever reason, they were dishonest, and I’m not scapegoating.”
The CEO even defended his decision not to tell investors earlier about the widespread fraud, because “it was not a material event.”
If high-level bankers didn’t go to prison for the subprime hijinks that caused the 2008 crash, it’s a safe bet that none will in the Wells Fargo scandal, either. But if arrogance were a criminal offense, Stumpf would be looking at a life sentence.
The bank’s fraud, and the executive’s insolence, may have one salutary result: It takes off the agenda any plan to dismantle the Consumer Financial Protection Bureau, one of the post-2008 regulatory creations and a top target of Donald Trump and congressional Republicans. The Los Angeles city attorney and the Los Angeles Times may deserve more credit for exposing the wrongdoing, but the audacity at Wells Fargo shows that the industry isn’t about to police itself.
Stumpf also managed to create rare bipartisan unity on the Banking Committee — in condemnation of his actions. Sherrod Brown (D-Ohio) was “stunned,” Dean Heller (R-Nev.) compared him to Sgt. Schultz of “Hogan’s Heroes,” Robert Menendez (D-N.J.) called the actions “despicable,” and Patrick J. Toomey (R-Pa.) told Stumpf: “This isn’t cross-selling, this is fraud.”
Populist firebrand Elizabeth Warren (D-Mass.) said the Wells Fargo chief should resign, return his payouts and be subject to criminal investigations. “If one of your tellers took a handful of $20 bills out of the crash drawer, they’d probably be looking at criminal charges for theft,” she said. But “you kept your job, you kept your multimillion-dollar bonuses and you went on television to blame thousands of $12-an-hour employees who were just trying to meet cross-sell quotas that made you rich.”
Stumpf blinked rapidly while listening to his accusers, as if sending Morse-code distress signals. His right hand, when he raised it to take the oath, was heavily bandaged. He offered obligatory statements of remorse (“I am deeply sorry that we’ve failed to fulfill on our responsibility. . . . I accept full responsibility for all unethical sales practices. . . . We should have done more, sooner”).
But how is it fair for executives to take home millions after thousands of workers defrauded customers?
“It’s a good question,” Stumpf allowed.
Why didn’t he bring in somebody to investigate?
“That’s a good question.”
Why didn’t the bank detect the fraud earlier?
“That’s a good question.”
Answers, however, were hard to come by. Would he recommend taking back some of the $125 million payout to the head of the division that committed the fraud?
“I’m not on the human resources and compensation committee.”
Was she at least fired over this?
“No, Carrie [Tolstedt] chose to retire.”
Half a dozen times, Stumpf repeated that the 5,300 workers fired were only 1 percent of his workforce — much like an airline executive arguing after a plane crash that 99 percent of his planes landed safely.
A fraud involving only 5,300 people? “Every time you say that, you give ammunition to the folks who want to break up the big banks,” Jon Tester (D-Mont.) told him.
And here’s more ammo: Stumpf, who presided over the whole thing, took home $19.3 million last year.