MINNEAPOLIS (WCCO) — U.S. lawmakers grilled the head of Wells Fargo on Tuesday over millions of fake accounts created in real customers’ names.
CEO John Stumpf, who is from Minnesota, answered tough questions before the Senate Banking Committee. Some lawmakers accused Stumpf of creating a corporate culture at Wells Fargo that pushed unreasonable expectations and pushed some employees to commit fraud.
Sen. Elizabeth Warren (D-Mass.) accused Stumpf of showing “gutless leadership” and told him he should resign and be criminally investigated by the Dept. of Justice (DOJ) and the Securities and Exchange Commission (SEC).
“Have you returned a nickel of the millions of dollars you earned when the scam was going on?” Warren asked.
When Stumpf did not immediately answer the question Warren said, “I will take that as a ‘no.'”
Star Tribune business and economics columnist Lee Schafer, explained Stumpf took a business model from his Norwest days in Minnesota with him to Wells Fargo.
Minnesota bank Norwest Corp. merged with Wells Fargo in 1998. Stumpf served as a top official in Norwest where Schafer explains the idea of “cross-selling,” or selling different products to existing customers, was a common and successful practice. Stumpf took the idea to Wells Fargo, where eventually employees were encouraged to get clients to open as many as eight products with Wells Fargo.
“It was a good idea that went too far and went off the rails,” Schafer said.
Lawmakers said the pressure from the top to perform led some workers to cross the line and open fake accounts beginning as far back as 2011.
“When I heard they had to fire 5,300 people, I just about fell out of my chair,” Schafer said. “That is a lot.”
Employees were being fired well into this year even as Stumpf acknowledged before the congressional committee that he knew about the fake accounts as far back as 2013.
“If I could turn the clock back — and I’ve thought about this 1,000 times — of course I wish I would’ve — we all woud’ve done something more, earlier. We didn’t get on this fast enough.” Stumpf admitted before lawmakers.
Although Wells Fargo leadership may not have acted quickly enough in stopping fraudulent activities, Schafer said punishment for the CEO may never happen, because the government would have to prove Stumpf encouraged employees to set up the fake accounts.
“This is nothing like the financial crisis, this is a totally different thing,” Schafer said. “But if you’re one of the people impacted — because maybe you bounced a check, because money got taken out of your checking account, because it got stuck in a dummy account — this is a problem.”
Wells Fargo has paid $185 million in fines.
Many questions at Tuesday’s congressional hearing focused on another top Wells Fargo official Carrie Tolstedt who oversaw community banking operations where all of the problems happened.
Tolstedt was allowed to retire in July at age 56 with a compensation package of tens of millions of dollars.
Stumpf said he did not fire Tolstedt because she performed well in many other areas.