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Wells Fargo CEO grilled by House panel
Wells Fargo CEO John Stumpf returns to Capitol Hill Thursday to testify about the bank's sales practices. Stumpf will appear before the House Financial Services Committee on Thursday morning. Scroll down for live updates.
12:47 p.m. Jim Himes (D-Conn.) highlighted that $20 billion in market value from Wells Fargo's stock has been erased amid this scandal. That is like "obliterating half of Ford Motor" in terms of market value, he said. Pressed Stumpf that it's more than just a question if the scandal met the definition of being "material." Held up a dollar bill and asked Stumpf if you can eat it. Highlighted that trust is the cornerstone of the financial system, including banks and currency. "It's bigger than the 185" referring to the fine Wells Fargo paid.
12:40 p.m. Robert Pittenger (R-N.C.) says "why today is such a sad day" because Wells Fargo has been a strong corporate citizen in North Carolina. Wells Fargo has a large corporate presence in Charlotte. Asked Stumpf what he would have done differently. Why didn't information get to Stumpf more timely fashion. "I've asked myself that a thousand times, a million times," Stumpf says. "We should have realized earlier product sales goals could illicit behavior" that is inconsistent with the bank's culture. "It isn't worth it," Stumpf says.
12:37 p.m. Ed Perlmutter (D-Colorado) challenged Stumpf on why Wells Fargo calls branches "stores" and adopts retail practices. "You're the heart of the financial system," he says. "You're a bank." Asked Stumpf why the bank even sets goals for employees. Stumpf said it was a way for employees to care about employees and have a conversation and meet a need with a product.
12:30 p.m. Mick Mulvaney (R-S.C.) expressed exasperation how badly the actions of Wells Fargo reflect on the market economy. Says wrongdoing validates many of the criticism of banks "by the other side." Pointed out that you can tell a great deal about a company looking at leadership. Called the bank "rotten." Pointed out printed reports of how Wells Fargo targeted the African Americans for subprime loans. "I am deeply sorry," Stumpf says, adding that isn't part of the company's culture. Pointed out Wells Fargo the largest lender to low income borrowers. "That behavior is not who I am," Stumpf says. Mulvaney said this action could be used by critics of banks to push for more regulation. Pointed out that all of these wrong doings occurred after bank regulations stepped up. "You can't fully regulate bad actors," he says. Criticised the board for not taking action against Stumpf. "You would't be here if I was on the board," Mulvaney says.
12:25 p.m. Keith Ellison (D-Minnesota) asked Stumpf is there were hundreds of "prospecting calls" that were required by employees to make. Stumpf said he didn't know the level of details. Ellison asked about "morning huddles" at banks where employees where given goals to sell a number of credit cards or if workers were punished for not reaching sales goals. Ellison listed the punishments that employees faced for not meeting goals. Stumpf said he didn't know the details of what employees' goals were.
12:20 p.m. Marlin Stutzman (R-Indiana) says has been a long time customer of Wells Fargo and got a motorcycle loan from Norwest (merged with Wells Fargo). Expressed frustration with Wells Fargo's recent Web site redesign. Said makes difficult to find accounts. Mentioned that customers had their credit rating "dinged" in cases were credit cards were open. Stumpf repeated bank's banks "to make things right." Again, said that branch managers', managers', manager is the highest level where employees have been punished. Calls for employees that were fired to appear before Congress. Asked if Wells Fargo is too big to manage. Stumpf said no because it was a "focused problem." Stutzman asked were was the outrage years ago when Stumpf heard about it. Asked for the number of CFPB regulators who were embedded at Wells Fargo. Stutzman blamed CFPB, as well, as Wells Fargo.
12:15 p.m. Gwen Moore (D-Wisconsin) asked about the household account targets. Stumpf said he expects employees to live by culture. Moore thanked Stumpf for "draining the swamp" of 5,000 employees that opened the secret accounts and expressed regret for Stumpf's loss of $41 million in unvested stock grants. "I was very disturbed" that numbers of the fraud were not large enough to be "material." "This is a quality company that made mistakes," Stumpf says.
12:09 p.m. Michael Fitzpatrick (R-Pennsylvania) said has heard from customers and employees. Asked when heard about it and what did. Stumpf said in 2013 heard of an acceleration of this activity in an area of the U.S., presumably in the Southwest. He said the bank started working on this issue and the practice came down. Stumpf says recalls that in summer or fall of 2013 first learned about the practice getting more serious. Stumpf repeated that Wells Fargo trained bankers for two weeks about Wells Fargo's culture. Wells Fargo stock down 22 cents, or 0.5%, to $45.08 as hearing continues.
12:04 p.m. Emanuel Cleaver (D-Missouri) said that constituents are "angry" including those that were "ripped off." Asked how far up the chain this fraud occurred. Stumpf repeated that 5,300 people "broke out trust" and the bank continues to do a complete review. Pointed out that money was returned. Cleaver pressed further about how far the scam went. "This was the opposite of what we trained for," Stumpf says, adding that it was 1% of people. Stumpf said the board is still researching that. Stumpf said it was branch managers, their managers and managers of managers. "Area presidents" are the highest level that were responsible. Stumpf said a person at area president level was fired.
11:58 a.m. William Posey (R-Florida) also blamed regulators for not getting on this fraud sooner. He asked if employees of different races or economic status were more likely to stretch to hit sales goals. Stumpf said no. Posey defended sales goals, says they are part of running a business. But worried that incentives to top executives distorted objectives. Posey asked if CFPB done anything to stop this from happening again. Stumpf didn't answer because time ran out.
11:53 a.m. "This is about greed. The same time of greed that created credit default swaps," says Al Green (D-Texas). Called this new scandal the cross-selling bubble. The bubble enticed investors to buy your stocks. When stocks bought, that benefitted Stumpf , Green says. "This will not end by simply having lower level employees go to jail," he says. He said if top level executives aren't punished, this will continue. "The public expects to see more than lower level people punished," he says. Calls for employees that were pressured to the point of causing this scandal to appear before Congress. He wonders how big the cross-selling bubble is. "Cross sell is a good thing" Stumpf says. Stumpf says he doesn't know how much cross selling is done by other banks. Green issued a warning that other bank executives need to be brought before Congress to discuss cross selling.
11:50 a.m. Steve Pearce (R-New Mexico) further pressed Stumpf on why more aggressive action wasn't taken to clean up the problem. "I see size and complexity being a great problem" since the massive fraud was still seen as immaterial and the stock price was doing well. "You have proved you did not offer leadership in this ... I think you should submit a resignation," he says. Stumpf said "we did take accountability" and saw the numbers coming down after making adjustments.
11:42 a.m. David Scott (D-Georgia) said he's never seen a banking fraud as outrageous. "You set the tone. You should be downright ashamed of yourself. You should apologize right now if have any strain of respect for the people in the United States," he says. Again, said that damage will be felt on entire banking industry. "I am sorry. I am accountable for this," Stumpf says. "I am deeply sorry." Scott says is a Wells Fargo customer. "The example you set is absolutely terrible," he says. Asked how many customers in Georgia had fraudulent set up. Stumpf referred to a folder. In Gerogia more than 55,000 that could not be ruled out as possible fraudulent accounts, Stumpf says. Stumpf said will work with every account and make it right. Asked Stumpf is he thought Stumpf's offenses were criminal. Stumpf said no.
11:37 a.m. Frank Lucas (R-Oklahoma) says "this has legal implications far beyond ... this committee." Said Stumpf made it hard for defenders of the market economy. "That's the most tragic thing about all this," he says. "Not pursing greed" needs to be part of the free market economy. "I don't know how you correct this," he says. But "you're going to have challenges for a long time to come," he says. Added that this scandal is tainting the entire banking sector. Stumpf talked about his background on the farm, too, along with Lucas. "I know we have lots of wrongs to right here," he says. "We've made mistakes" and added the company is a large employer and contributes to local communities.
11:31 a.m. Stephen Lynch (D-Massachusetts) says further investigation is needed. "The fines thus far are pathetic" and not enough "to bring Wells Fargo into compliance with the law," he says. Urges further investigation including testimony of employees of the bank. "This has gone on for at least five years," he says. Says that Stumpf doesn't appreciate the level of the wrongdoing and that further penalty is needed. "These people are your customers ... became victims because they did business with your bank," Lynch says. Said that the situation "covers every aspect of fraud" and meets levels needed to be criminal offenses under RICO. Asked Stumpf if suspicious activity reports were filed with Treasury Department. "You're not in complicance," Lynch says. Stumpf said the bank did everything that was required. Lynch says the board of the bank must maintain proper "internal controls."
11:26 a.m. Ed Royce (R-California) asked if targets for employees to open eight accounts per household contributed to the problem. Stumpf said it wasn't a hard and fast target. Royce asked if Los Angeles Times article was read or mentioned in the board. Stumpf said it was. Asked why Wells Fargo continued to report the metric showing high multiple accounts per household could be distorted, why did the company keep reporting it? Royce said in 2013 Wells Fargo knew many of the accounts were bogus. Stumpf said that the number of fake accounts relative to all the accounts was "immaterial." Royce says correction this will take a course of action that hasn't been displayed yet. Said that steps taken by Wells Fargo affected the credit of many consumers.
11:20 a.m. "You have brought bipartisanship. We are not happy," joked Michael Capuano (D-Massachusetts). Said the bank has a litany of problems defrauding government mortgage agencies and different minority groups. "Your problem is coming. You think it's today. When prosecutors get a hold of you, it's going to be fun." Showed picture of a bank robber who was jailed, despite saying he was sorry and not using a firearm. Then described the bank fraud, said fired workers. "You can you entire management team" are guilty of a dozen crimes. "Why shouldn't you be in jail? What's the difference?" Said 16 violations in five years.
11:15 a.m. Sean Duffy (R-Wisconsin) said he has been a long time, 20-year customer of the bank. Said he has been happy as a customer, but quickly raised his voice in outrage. "Did Wells Fargo employees steal?" he says. "In some cases, they did," Stumpf says. Rattles off year after year "you're stealing from people" and that nothing was done. "Trying to do? We're five year on," Duffy says. Stumpf says when accounts opened but not funded, should be auto closed. Duffy says in 2011 the board knew that people were fired, but didn't ask what these people doing to cause them to be canned. "Wells Fargo has a big problem," Duffy says. "I think Wells Fargo making lots of money from what you were doing (might be caught) ... but cost of doing business," Duffy says. Stumpf says this is a "loser for us." It cost the company $10 million to open the accounts and close them. "Shame on Wells Fargo," Duffy.
11:09 a.m. "I can't believe what I'm hearing here," says Gregory Meeks (D-New York). He listed several occurrences that the bank had been penalized multiple times in 2013. "You're going to tell me there's not a problem with the culture" at Wells Fargo. "You get a bonus because a certain number of dollars come in." "The whole board needs to go" if they allowed someone to be in charge when "something was going wrong at the bank and you were in charge of it." Asked if Stumpf what he'd so if someone robbed and bank and then said they were sorry. "I see something very differetn between being honest and breaking the code of ethics," Stumpf says. "I believe that financial institutions make us better off, until they rip us off," Meeks says. "We've made mistakes. We're upping our game," Stumpf. "Don't come and tell me you're sorry," Meeks says.
11:05 a.m. Blaine Luetkemeyer (R-Missouri) asked Stumpf how many regulators regularly look over the bank. "I don't have the precise amount," Stumpf says, adding that he estimates it's around 80. Luetkemeyer said that Stumpf's recent surrender of pay was appropriate. Stumpf said the bank did take action and more training was started in 2012. "This does not represent the culture," Strumpf said. Luetkemeyer disagreed because the fraud was so long standing. Leutkemeyer asked when Wells Fargo reported the situation to its blanket bond company. Stumpf said he didn't know but would look.
11:01 a.m.: Rep. Brad Sherman (R-Calif.) seeks assurances that similar practices don't happen at other banks. Sherman wants to see leaders of other banks step forward before lawmakers to discuss how they prevent similar issues. Sherman asks whether Wells Fargo will hold customers to forced arbitration clauses in the event of lawsuits. Stumpf says he will allow mediators, but Sherman pushes on whether they'll be allowed to go to court. Stumpf says they won't.
10:56 a.m.: Rep. Scott Garrett (R-N.J.) focuses on the dismissals of 5,300 employees because of the fake accounts. He notes employees were fired over a longer stretch instead of dismissing them all at once. Garrett also takes a shot at Stumpf for a "failure" in management. He also questions why senior executives aren't held accountable. "We have a problem in this country where the well connected ... seem to be playing by a different set of rules." Garrett also slams federal banking regulators for being "asleep at the wheel." "They completely blew it," he says.
10:53 a.m.: Velazquez blasts Stumpf for a "lack of leadership" in adequately protecting small businesses and customers. She asks whether retail banking employees will receive raises, criticizing the company for how difficult it is for employees "to live off a $25,000 salary."
10:50 a.m.: Rep. Lydia Velazquez (D-N.Y.) asks how many employees were fired for failing to meet sales quotas. Stumpf says all 5,300 were terminated "because of their ethical behavior." Velazquez presses again on the quotas. Stumpf says people should not be fired for missing sales goals, but admits it could have happened. Velazquez says if employees were found to be fired because of quotas, would they be rehired. Stumpf disputes the use of the word quotas, repeating they're "sales goals."
10:45 a.m.: Rep. Patrick McHenry (R-N.C.) note Charlotte's long history with the banking industry, citing Wachovia, acquired by Wells Fargo in 2008. McHenry expresses concern over what this scandal means for employees in his state. He blasts Stumpf for not sticking to the company's code of conduct, after reading excerpts directly from company documents. "You clearly have failed. You've clearly failed your own ethical standards internally." The exchange between McHenry and Stumpf is perhaps the most contentious so far.
10:42 a.m.: Stumpf says the company's internal review would go back as far as 2011 to review accounts, and says they will consider going even further, to 2009. Maloney notes a lawsuit involving the illegal sales of credit card accounts going back to 2007. Maloney asks whether Stumpf will agree to extend the review to 2007. "We will go back if we find any evidence of any customer who was harmed," says Stumpf. "We will take care of every customer."
10:39 a.m.: Rep. Carolyn Maloney (D-N.Y.) continues the panel's focus on the timing of when Stumpf first learned of the accounts. Maloney notes Stumpf sold $13 million of Wells Fargo stock, asking whether he dumped the stock right after finding out about the fraudulent accounts. "The timing is very, very suspicious and raises some serious questions." Stumpf says he sold the shares "with no view of what was going on." Maloney scolds Stumpf on the move, saying it seems instead of helping customers first, "you helped yourself."
10:36 a.m.: Neugebauer asks when the Wells board knew about the allegations. Stumpf says by 2014, more information on the problems were delivered to the board followed by a full report to the board in 2015. Neugebauer asks whether details of the allegations were disclosed in filings with the Securities and Exchange Commission. Stumpf says they were not.
10:34 a.m.: Rep. Randy Neugebauer (R-Texas) asks whether Stumpf should hold both roles as chairman and CEO at Wells Fargo. Stumpf says the bank's board "acts quite independently," citing the decisions made tied to Stumpf's compensation.
10:31 a.m.: Waters asks whether sales incentives employed in 2011 would help drive fraud of this level. Stumpf says the number of people involved represents about 1% of the company's workforce. Stumpf says sales goals will be removed "as of this weekend."
10:29 a.m.: Waters starts with the timing of when Stumpf knew about issues tied to retail banking. According to Waters, Stumpf says he first knew in 2013, but cites documents noting he may have known as far back as 2008. Waters also notes Wells Fargo was already placed on watch for sales quotas. Stumpf says the company has controls and ethical standards in place to prevent problems like this. Stumpf admit first knowing about account problems in 2013. Stumpf also points out customer service ratings, which he says are the highest in recent history.
10:25 a.m.: Hensarling discusses a government agreement in 2011 with The Federal Reserve related to mortgage lending, quoting the Fed about questionable internal procedures at the bank. "If you saw the problem in one area of the business, why wouldn't you do it for the other?" Stumpf acknowledges more should have been done to explore issues in their retail banking division.
10:22 a.m.: Hensarling questions the lack of accountability in cases like Wells Fargo. "This kinda feels like deja vu all over again." He starts with the first question, asking who's the highest-ranking official dismissed because of the activities. Stumpf notes of the 5,300 employees dismissed, about 10% or more were managers at branches. Stumpf says employees "will be reviewed across the board." Hensarling pushes for accountability from a higher-ranking official.
10:19 a.m.: Stumpf says Wells Fargo has started contacting customers about their credit card accounts, asking whether they wanted the account or not. Stumpf notes 20% were not aware the account was opened or couldn't remember whether they wanted the account. Any customer with an unwanted account can have it closed. Stumpf says they are expanding the scope of their review to look at additional accounts.
10:16 a.m.: Stumpf delivers his opening remarks, offering another apology for the scandal. He also questions claims that this was part of an "orchestrated effort" to rip off consumers. "We never directed nor wanted our employees, whom we refer to as team members, to provide products and services to customers they did not want or need."
10:14 a.m.: So far, no one is pulling punches on Stumpf. Waters notes the story of a California resident who complained about "excessive accounts" at a local Wells Fargo and was later arrested. Waters also notes the efforts Stumpf and Wells Fargo have made, including giving back $41 million in unvested stock awards, but seeks more. "That is welcome, but let me clear, that is not enough."
10:10 a.m.: Hensarling questions federal regulators and whether they acted appropriately to discover and react to the allegations. "Perhaps they deserve a pat on the back, or perhaps they deserve a swift kick on the backside." He also calls out Stumpf, noting he "regrets" holding a mortgage with Wells Fargo because of the broken trust. Rep. Maxine Waters (D-Calif.) offers harsher words for Stumpf, comparing the allegations to identity theft. "Let's call it what it really is: some of the most egregious fraud we have seen since the foreclosure crisis."
10:03 a.m. ET: Texas representative Jeb Hensarling, chair of the financial services committee, prepares opening remarks, noting how customers were "ripped off" by Wells Fargo and let down by the government. He cites customers with lowered credit scores or fees they were forced to pay because employees allegedly opened accounts without informing them. "The cost is big."
On Tuesday, Stumpf say he would give up $41 million in unvested stock awardsfollowing an internal investigation into employees were allegedly secretly opening hundreds of thousands of accounts for customers.
Prior to the move, Stumpf had stood to gain more than $123 million in severance and stock value if he retired from Wells Fargo.
Last week, U.S. senators grilled Stumpf and Wells Fargo, urging an investigation into the bank's employment practices.Content originally published by the USA Today on September 29th, 2016.