Tags: wells fargo | john stumpf | congress | lawmakers

House Panel Lambasts Wells Fargo Boss Over Phantom Accounts

Image: House Panel Lambasts Wells Fargo Boss Over Phantom Accounts

John Stumpf (AP Photo/Jeff Chiu)

Thursday, 29 Sep 2016 11:58 AM


Wells Fargo & Co. Chief Executive Officer John Stumpf on Thursday offered Capitol Hill lawmakers a series of actions to fix widespread sales abuses but remained defensive on issues like consumer lawsuits, the weakness of an internal investigation and his sale of Wells Fargo shares.

House lawmakers from both parties poured scorn on the CEO, often with raised, angry voices, for his lack of oversight that allowed the bank to create fee-generating ghost accounts.

Jeb Hensarling, the Republican chairman of the House Financial Services Committee, said in his opening statement that he has lost faith in Wells Fargo, where he has a mortgage.

"Mr. Stumpf, I have a mortgage with your bank," Hensarling said. "I wish I didn’t. I wish I was in the position to pay it off because you have broken my trust as you have broken the trust of millions."

Stumpf said he was sorry the bank broke the trust of its customers and admitted under questioning that employees stole money through unwarranted fees.

Asked by Representative Sean Duffy, a Republican from Wisconsin, about whether Wells Fargo employees 'stole,' Stumpf said, "In some cases, they did."

The sales practices have exploded into a scandal in Washington, on Main Street as well on Wall Street. The hearing, the second on Capitol Hill this month, raised the possibility lawmakers may look at banks' sales practices beyond Wells Fargo.

House lawmakers from both parties poured scorn on the CEO, often with raised, angry voices, for his lack of oversight that allowed the bank to create fee-generating ghost accounts.

Representative Brad Sherman said, "The American people need an assurance that this cross-selling mania that has affected Wells Fargo is not to be found at the other behemoth banks."

Sherman asked the committee to summon other Wall Street chiefs, including from Citigroup Inc and Bank of America Corp, to determine if they have imposed sales demands and quotas on their employees.

"I don't think, Mr. Stumpf, that you should be alone in this joyous experience," said the California Democrat.

Stumpf told lawmakers that Wells Fargo will eliminate sales quotas for branch staff starting Oct. 1, three months earlier than planned.

He said the bank was strengthening oversight of sales tactics and changing procedures for issuing credit cards. It also paid back past and current customers for any fees incurrent on the ghost accounts.

Earlier this week, the bank took back $41 million in stock awarded to Stumpf, an unprecedented rebuke to a major U.S. bank CEO, but the move is unlikely to silence calls for his resignation. Investigators found that branch staff opened as many as 2 million unauthorized credit card and deposit accounts to meet sales quotas.

When pushed about whether the bank would waive its mandatory arbitration rules so customers could sue the bank, he said "no."

Representative Maxine Waters, the committee's ranking Democrat, said fraudulently opening accounts amounted to identity theft. She called the sales abuses "some of the most egregious fraud we have seen since the foreclosure crisis."

Representative Carolyn Maloney raised questions about $13 million in stock sales by the CEO in 2013 after he learned about the abuses. Stumpf said he sold stock with proper approvals and added that the sales were made "with no view about what was going on."

The affair has triggered lawsuits, more investigations and wiped more than $20 billion from the bank's market value.

On Wednesday, California, Wells Fargo's home state, suspended business relationships with the bank for a year and said it would work with the state's two giant public pension funds to change the management structure at the bank, including separating the roles of CEO and chairman.

The episode has been a stunning reversal for Stumpf, long regarded as a safe pair of hands in the industry for navigating Wells Fargo successfully through the financial crisis.

It was the second congressional appearance this month for Stumpf, who has worked at the bank for about 35 years.

Thursday's testimony follows a bipartisan tongue-lashing Stumpf from the Senate Banking Committee on Sept. 20, when Senator Elizabeth Warren of Massachusetts called him a "gutless leader" who should be criminally investigated.

At least five Wells Fargo employees have sued the bank or filed complaints with regulators, claiming they were fired after reporting the opening of customer accounts without permission, according to a Reuters review of lawsuits and complaints to the U.S. Labor Department.

Federal regulators will also be in focus at the hearing.

U.S. Federal Reserve Chair Janet Yellen promised the committee on Wednesday that the central bank will scrutinize all big banks in the wake of the Wells Fargo matter. Some Democratic committee members said it showed that some banks are too big to manage and should be broken up.

Wells Fargo shares fell nearly 1 percent to $44.92.

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Wells Fargo's CEO, newly stripped of tens of millions in compensation in a scandal over sales practices, told angry lawmakers Thursday the bank is expanding its review of accounts and will evaluate executives' roles.
wells fargo, john stumpf, congress, lawmakers
Thursday, 29 Sep 2016 11:58 AM
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