Too big to fail, too ar­ro­gant to ad­mit it

Cecil Whig - - OPINION - Dana Milbank

— 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 high­level 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.”

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.”

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 (DN.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-an­hour 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.

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 (DMont.) told him.

And here’s more ammo: Stumpf, who presided over the whole thing, took home $19.3 mil­lion last year.

Dana Milbank is a syn­di­cated colum­nist. Con­tact him at danamil­bank@wash­

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