To say Wells Fargo CEO John Stumpf’s appearance in front of the Senate Banking Committee Tuesday did not go well would be an understatement. Stumpf got a nasty bipartisan grilling over Wells Fargo’s deceptive practice of opening accounts for customers without their permission, which may have resulted in the creation of more than 2 million phantom accounts.
Even so, the reception Stumpf received from Massachusetts Sen. Elizabeth Warren stood out for its ferocity.
Warren called the creation of the fake accounts a “massive, years-long scam,” and said it stemmed directly from Wells Fargo’s attempts to get each customer to open eight separate accounts—a practice known as “cross selling.” (At other banks, Warren said, individual customers average less than three separate accounts.)
When Stumpf tried to defend the practice, saying cross selling is “shorthand for deepening relationships,” Warren cut him off—noting that Stumpf regularly touted cross selling as a reason for investors to buy Wells Fargo stock.
“You squeezed your employees to the breaking point so they would cheat customers, and you could drive up the value of your stock, and put hundreds of millions of dollars in your own pocket,” Warren said.
Warren also mocked Stumpf’s repeated assertion that he’s accepted accountability for the scandal, asking if he’s returned “one nickel” of his compensation from the period in question.
When Stumpf declined to give an explicit answer, Warren accused him of “gutless leadership.” But she saved her harshest comments for the end of her allotted time.
“When it all blew up, you kept your job, you kept your multimillion dollar bonuses, and you went on television to blame thousands of $12-an-hour employees who were just trying to meet cross-sell quotas that made you rich,” Warren said.
“You should resign,” she added. “You should give back the money that you took while this scam was going on, and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission.”
And then Warren—who’s previously questioned the federal government’s unwillingness to prosecute top Wall Street executives after 2008 financial collapse—returned to that topic.
“The only way that Wall Street will change is if executives face jail time when they preside over massive frauds," Warren said. "We need tough new laws to hold corporate executives personally accountable, and we need tough prosecutors who have the courage to go after people at the top. Until then, it will be business as usual.”
Wells Fargo has agreed this to pay $185 million in penalties for its deceptive practices. It also faces a new class-action lawsuit filed by three customers in Utah last week.
