House members get their chance to unload on Wells Fargo chief
WASHINGTON — Wells Fargo CEO John Stumpf did himself few favors in testifying before the House Financial Services Committee on Thursday, as members of both parties accused the company of criminal activity ranging from racketeering to identity theft in opening as many as 2 million phony accounts without customers’ knowledge.
The committee’s top-ranking Democrat, Rep. Maxine Waters of Los Angeles, said she would pursue the breakup of the San Francisco-based bank, calling it “too big to manage.” Wells Fargo is the nation’s second-largest bank, and its 164-year history is rooted in the American West.
Several Republicans called for Stumpf ’s resignation, saying he had undermined their efforts to support free markets and ease bank regulation. The
scandal has erased billions of dollars from Wells Fargo’s stock value and sent fears through the banking industry of a political backlash.
The committee’s chairman, Rep. Jeb Hensarling, R-Texas, accused Wells Fargo of breaking numerous laws and promised that the hearing was “just the beginning” of his investigation. He said he was asking for thousands of pages of Wells Fargo documents, in part to determine when executives first learned of the fraud.
“Millions of Americans were ripped off by their bank,” Hensarling said. “Fraud is fraud and theft is theft, and what happened at Wells Fargo over the years cannot be described in any other way.”
The committee found that the bank has paid hundreds of millions of dollars in fines over the past few years and that the pattern of fake account creation may have begun as early as 2007, the year Stumpf became chief executive. Members expressed disbelief that none of the bank’s top executives had noticed anything awry, even as Wells Fargo fired, by its count, 5,300 mostly branch-level employees and managers.
“Why didn’t it stop after first 1,000 employees were fired?” asked Rep. Scott Garrett, R-N.J.
“No question we should have done more, sooner,” said Stumpf, who insisted he didn’t learn of the problem until 2013 — the year the Los Angeles Times first reported that Wells Fargo employees were creating fake accounts in response to a high-pressure corporate culture.
Following a similar grilling by the Senate Banking Committee last week, Stumpf forfeited $41 million in unvested stock payouts. But Wells Fargo’s board, which he chairs, has not called for his resignation and has fired no top executives. Stumpf said he is forgoing his salary and bonuses — which provided him with $19.3 million last year — as he attempts to fix the problems.
The bank’s board also revoked the $19 million in stock awards it gave to former retail banking executive Carrie Tolstedt when she retired, with an estimated $77 million in stock awards, after the scandal broke.
Stumpf said he is eliminating sales goals for bank employees “as of this weekend.”
He repeatedly apologized through more than four hours of testimony, but generally attributed the blame for the accounts to low-level employees. “I didn’t set up any of these accounts,” Stumpf said at one point. “I led the company with courage,” he said at another.
Stumpf argued that the fake accounts were not in Wells Fargo’s financial interest because they cost the bank money, even though executives had boasted to stock analysts of their success in “cross-selling” new accounts to existing customers.
After congratulating Stumpf on his success in uniting Democrats and Republicans, Rep. Michael Capuano, D-Mass., asked why someone accused of robbing a Wells Fargo branch shouldn’t be let off with an apology. Stumpf replied, “Being dishonest and breaking the law is something very different.”
The House hearing came one day after California Treasurer John Chiang said the state was suspending Wells Fargo from underwriting bonds and purchasing other investments on behalf of taxpayers for a year.
Chiang said he was motivated by Stumpf ’s appearance last week before the Senate Banking Committee, where Sen. Elizabeth Warren, a Massachusetts Democrat and former Harvard Law professor, sought to dismantle his assertions that neither he nor the bank had profited from the fake accounts.
Rep. Mick Mulvaney, R-S.C., said Thursday that Stumpf had undermined the free-market arguments Republicans had been making to oppose stricter bank regulation.
“To have you essentially validate everything the other side says,” Mulvaney said, “the damage you have done to the market and to the industry far exceeds the damage you have done to your own business.”
Wells Fargo has spent lavishly on philanthropic activities throughout California to enhance its public image and its support in Congress. The bank has also made $2.7 million in campaign contributions in just the past two years, according to OpenSecrets, a group that tracks campaign contributions.
Rep. Mark DeSaulnier, DConcord, has said he would rip up his Wells Fargo credit card and send the pieces, along with the bank’s $1,000 contribution to his campaign, back to Stumpf.
Rep. Eric Swalwell, D-Dublin, said Wednesday that he has donated his $4,000 campaign contribution from the bank to Abode Services, a nonprofit in Fremont that secures permanent housing for homeless people in Alameda, Santa Clara, San Mateo and Santa Cruz counties.