Calling it “outrageous” and “a major breach of trust,” local and federal regulators hammered Wells Fargo & Co. for a pervasive culture of aggressive sales goals that pushed thousands of workers to open as many as 2 million accounts that bank customers never wanted.
Those practices led to a massive $185-million settlement package announced Thursday.
The settlements put to rest a lawsuit filed last year by Los Angeles City Atty. Mike Feuer as well as investigations by two federal regulators: the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.
Wells Fargo Chairman and CEO John G. Stumpf, who has been described as “the Mr. Clean of banking,” took his unflappable and well-groomed mien Tuesday to a hearing room on Capitol Hill to defend the bank’s actions after the disclosure that it had massively defrauded millions of its customers.
One of the nation’s key banking regulators told senators today that his agency is looking at all of the country’s large and mid-sized banks to see if they’re guilty of the same types of fraudulent practices uncovered at Wells Fargo.
Examiners from the Office of the Comptroller of the Currency will review sales practices at the nation’s banks to see if they might encourage illegal or dangerous behavior, including creating fake accounts in the name of meeting sales goals, Comptroller of the Currency Thomas Curry said at today's Senate Banking Comittee hearing.
Curry and other regulators — including Richard Cordray, director of the Consumer Financial Protection Bureau, and Jim Clark, chief deputy Los Angeles city attorney — testified after Wells Fargo chief John Stumpf took his turn in the hot seat.
As senators peppered him with questions today, Wells Fargo Chief Executive John Stumpf offered some disclaimers about his qualifications to answer. Here are some titles he made sure to say do not apply to him.
1. A compensation expert
The CEO, repeatedly asked whether he would support taking back some of the compensation set to be paid to the executive who oversaw the bank’s retail division, refused to take a position. Stumpf said a committee within Wells Fargo’s board would take up that issue, and at one point noted, “I’m not an expert in compensation.”
Under aggressive questioning by Sen. Elizabeth Warren (D-Mass.), Wells Fargo chief John Stumpf would not commit to pushing for the bank to rescind some of the approximately $100 million in compensation received by the executive who oversaw the employees who opened unauthorized customer accounts.
Stumpf also said he never considered firing the executive, Carrie Tolstedt, who announced her retirement in July, effective at the end of the year.
“Seriously?” Warren responded during today's Senate Banking Committee hearing. “You didn’t even once consider firing her ahead of her retirement?”
There’s a silver lining to this Wells Fargo scandal, columnist David Lazarus says.
“Without your attempt to fleece millions of customers with bogus accounts, and the $185-million fine you just got slapped with, and your cowardly move to blame the whole mess on wayward employees, it’s entirely possible that the banking industry and conservative lawmakers would have succeeded in overturning financial reforms put in place after the last time banks screwed over the public,” he writes.
“Thanks to you, however,” Lazarus says, “legislation aimed at killing the Dodd-Frank Wall Street Reform and Consumer Protection Act is now on life support. The bill’s proponents still insist that banks be freed from burdensome regulations. But you’ve shown that, if anything, banks probably should be on an even shorter leash.”
"The outrageous scandal at Wells Fargo & Co., for which federal and local regulators hammered the bank for $185 million in fines and penalties earlier this month, speaks volumes about the decline of morality in corporate America," columnist Michael Hiltzik writes.
"But the settlement leaves one burning question unanswered: Why does John G. Stumpf, the company’s chairman and CEO, still have a job?"
Over the years, many Wells Fargo customers have tried to sue the bank over fake accounts, but their cases have run into an increasingly familiar roadblock: arbitration clauses.
When customers sign up for accounts at Wells Fargo -- and at most other banks -- they sign contracts that oblige them to resolve disputes with the bank in private arbitration rather than in court. Wells Fargo has successfully argued that applies even in cases where customers have accused the bank of opening fake accounts in their names.
The argument goes something like this: Although a customer obviously didn't sign a contract when a fake account was created for them, agreements they signed when opening genuine accounts nevertheless require them to take all disputes with the bank to arbitration. Judges have generally agreed.
Sep. 20, 2016, 9:49 a.m.
You keep saying, 'The board, the board,' as if these are strangers you met in a dark alley.
Sen. Elizabeth Warren (D-Mass.) on John Stumpf's comments about who will decide whether Wells Fargo executives' compensation should be clawed back
Much of the fraudulent account activity at the heart of the Wells Fargo sales scandal was centered in the Los Angeles area, Wells Fargo Chairman John Stumpf confirmed during his appearance before the Senate Banking Committee today.
The banking giant’s employees created some 2 million fake accounts nationwide to meet aggressive sales goals.
After Sen. Jerry Moran (R-Kan.) asked Stumpf what was different about the Los Angeles market, Stumpf did not provide an answer but said Wells Fargo was analyzing the issue.