Wells Fargo chief blames scandal on bank’s workers

John Stumpf denies his leadership, firm’s culture are causes.

WASHINGTON — In more than four hours of intense and hostile questioning Thursday, lawmakers denounced Wells Fargo’s history of illegally created sham bank and credit card accounts opened by its employees in the names of real customers: It was “theft,” “a criminal enterprise,” identity fraud, an outrage, and a devastating blow to the entire banking industry.

But the company’s chief executive, John Stumpf — whom the members of the House Financial Services Committee personally blamed for the persistent and widespread misdeeds — stuck to the same script he has used throughout the crisis. The problem, he explained, was an ethical lapse limited to the 5,300 employees, most of them low-level bankers and tellers, who had been fired for their actions since 2011.

Stumpf apologized repeatedly for his bank’s failings and repeated his earlier pledge — given last week to the disgruntled Senate Finance Committee — to accept “full responsibility” for them. But he again rejected lawmakers’ attempts to cast the scandal as a consequence of broader failings in Wells Fargo’s leadership and corporate culture.

“I led the company with courage,” Stumpf said.

Wells Fargo has been in crisis mode since it acknowledged this month that its employees had, over the course of several years, opened as many as 1.5 million bank accounts and 565,000 credit card accounts that may not have been approved by customers. The company agreed to pay $185 million in penalties and fines to settle cases brought by federal regulators and the Los Angeles city attorney, and said it had fired 5,300 employees.

In between the Senate’s hearing with Stumpf and the House’s on Thursday, the board of directors of Wells Fargo agreed to claw back $41 million of Stumpf ’s unvested stock awards, deny him his annual bonus this year and strip away a portion of his $2.8 million base salary. Stumpf, the board’s chairman, said he approved of the decision. Carrie Tolstedt, who until recently ran the Wells Fargo retail banking operation, will lose $19 million in compensation.

Confronted by the lawmakers with evidence that the practice of setting up phony accounts to meet sales goals might have gone back much further than the bank has admitted, perhaps to 2007, Stumpf said that Wells Fargo was continuing to investigate the extent of the problem.

But that did not appease the lawmakers. Several called for Stumpf’s resignation, and others asked why he shouldn’t be jailed, like a bank robber.

“Something is going wrong at this bank, and you are the head of it,” said Rep. Gregory Meeks, D-N.Y., adding, “You should be fired.”

Stumpf replied, “I serve at the pleasure of the board.”

Meeks, at times pounding the table for emphasis, asked if Stumpf would have set free someone who had robbed a Wells Fargo Bank, and then simply apologized and taken responsibility. Criticizing Wells Fargo’s “criminal activity,” Meeks said: “Your bank, Wells Fargo, has given the entire financial services industry a black eye.”

Congressional hearings to rake Wall Street leaders over the coals for their companies’ illegal acts have become a common spectacle — a point several members mentioned during the hearing.

“To the American people, this kind of feels like déjà vu all over again,” said Rep. Jeb Hensarling, R-Texas, chairman of the committee.

AL DRAGO / NEW YORK TIMES John Stumpf, chief executive of Wells Fargo, testifies Thursday before the House Financial Services Committee investigating the bank’s opening of millions of unauthorized customer accounts. He blamed an ethical lapse by 5,300 employees.