Mr. Stumpf goes to Washington
Wells Fargo CEO John Stumpf on Tuesday faced nearly three hours of grilling during a Senate Banking Committee hearing on the bank’s allegedly illegal sales practices.
Stumpf faced a barrage of criticism from both sides of the aisle. Here are four key moments:
‘This is about accountability’
Not surprisingly, one of the most dramatic confrontations involved Democrat Elizabeth Warren, known for harsh rhetoric about big banks.
“This is about accountability,” said Warren, who accused Stumpf of “gutless leadership” and told him he should resign.
“You haven’t returned a single nickel of your personal earnings. You haven’t fired a single senior executive,” Warren said.
“Instead, 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,” she said.
Stumpf acknowledged Tuesday that steps the bank took to crack down on bad behavior were not enough. But he noted changes the bank has made to prevent similar behavior in the future, such ending sales goals for retail bankers starting next year.
‘Pumping up Wells’ stock price’
Warren also noted Stumpf’s heavy focus as CEO on cross-selling, a practice of getting multiple products in a customer’s hands.
During the period when the alleged abuses were taking place, Wells Fargo’s stock rose as it promoted its cross-selling prowess to investors, Warren said. Warren said Stumpf enjoyed millions of dollars in gains as the stock rose.
Cross-selling, Warren said, “is all about pumping up Wells’ stock price.”
“And when it all blew up, you kept your job, you kept your multimillion-dollar bonus 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,” she said.
Stumpf said cross-selling is a way of deepening relationships with customers and that the bank never directed or wanted employees to sell products customers did not want.
‘You were never told about that?’
Lawmakers, including Louisiana Republican David Vitter, pressed Stumpf on when he knew employees were opening accounts without customers’ authorization to meet sales goals.
Wells Fargo has said it fired 5,300 people between January 2011 and March 2016 for secretly opening accounts.
On Tuesday, Stumpf disclosed he didn’t learn about the behavior until 2013, a remark that drew this comment from Vitter:
“In 2011, about 1,000 employees were fired over this. ... So, 1 percent of a whole, big part of your business was fired over fraud, and you were never told about that?”
“One percent of a big part of your business is fired over fraud, but that doesn’t rise to your level?”
Stumpf noted it was a good question, but called the matter a “problem of focus and not of size.” Stumpf also noted the firings were dealt with inside the community banking unit, not at his level.
‘It’s not a square deal’
Joe Donnelly, an Indiana Democrat, was among lawmakers who criticized the bank for firing low-level employees but no senior executives.
Carrie Tolstedt, who headed the community banking unit and plans to retire at the end of this year, made $9.1 million in salary, bonus and stock awards in 2015. According to the bank, she has roughly $96 million in Wells Fargo stock, unexercised stock options and unvested and unpaid stock awards.
“It’s not a square deal when the people that are fired are the tellers who make 15 bucks,” while senior executives talk away with millions of dollars, Donnelly said. “How do you fire someone making 15 bucks and not the person” over the unit?
Stumpf called it an important question but drew a distinction.
“There’s something very different about violating our code of ethics and putting customers at risk and being dishonest,” Stumpf said, “versus someone who did not spend enough time making sure that this issue had been closed.”