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September 20, 2016 at 12:07 PM
In an uncommon display of bipartisan unity, lawmakers on the Senate banking committee condemned Wells Fargo & Co. chief executive John Stumpf on Tuesday for the bank’s failure to prevent abusive sales tactics and its perceived reluctance to hold senior executives accountable for widespread scheme that led to a $185 million settlement earlier this month.
Sen. Elizabeth Warren, D-Massachusetts, brought the most scathing criticism, calling for Stumpf to resign and for the U.S. Department of Justice and Securities and Exchange Commission to launch probes of the bank.
As part of the settlement, in which the bank did not admit or deny the allegations, Wells Fargo agreed to pay a $100 million civil penalty to the Consumer Financial Protection Bureau—the largest fine in the short history of the watchdog agency, which was established in 2011. The CFPB alleged that thousands of Wells Fargo employees, driven by sales goals and salary bonuses, created more than 1.5 million unauthorized deposit accounts and applied for as many as 565,000 credit card accounts without customers’ knowledge, sometimes by creating phony email accounts.
In prepared remarks to the committee, Stumpf said he was “deeply sorry” for those practices, although the bank did not formally admit or deny the allegations in the CFPB consent order.
“I have been with Wells Fargo through many challenges, none that pains me more than the one we will discuss this morning,” Stumpf said.
“I do want to make very clear that there was no orchestrated effort, or scheme as some have called it, by the company,” he added, saying that he took “full responsibility for all unethical sales practices in our retail banking business.”
But the banking committee senators questioned whether he and other senior executives had, in fact, taken that responsibility.
“You’ve pushed the blame to low-level employees who don’t have the money for a fancy PR firm to defend themselves. It’s gutless leadership,” Warren said.
“This is about accountability. You should resign. You should give back the money you took when this scam was going on,” she continued, before adding that the bank should be investigated. Warren, the architect of the financial protection bureau, along with other Democrats, repeatedly pressed Stumpf over reports that Carrie Tolstedt, the executive in charge of Wells Fargo’s retail banking business, would receive a $125 million payout upon her retirement. Warren, the Senate’s most vocal critic of banks, asked Stumpf whether he would personally recommend clawing back that compensation package.
Stumpf, who also serves as chairman of the Wells Fargo board, declined to state a position, saying he did not want to prejudice the board’s review of Tolstedt’s compensation. Asked whether he considered firing Tolstedt, Stumpf said Wells Fargo’s chief operating officer told her earlier in the summer that the bank wanted to go in a “different direction.” Tolstedt was eligible to retire and elected to do so, Stumpf said. She will leave the bank later this year.
