U.S. House panel lambastes Wells Fargo boss over phantom accounts
Patrick Rucker and Dan Freed
WASHINGTON/NEW YORK — U.S. lawmakers called on Thursday for Wells Fargo & Co chief John Stumpf to resign and a top House Democrat demanded the bank be broken up because it is too big to manage.
Stumpf's second trip to Capitol Hill on Thursday went no better than his first as lawmakers from both parties rebuked his handling of sales abuses and said the bank had damaged customer trust as well as the broader banking system.
Wells Fargo staff opened checking, savings and credit card accounts without customer say-so for years to satisfy managers' demand for new business, according to a $190 million settlement with regulators reached early this month.
U.S. Representative Maxine Waters, the committee's senior Democrat, faulted the bank for identity theft in the fraud and called for Wells Fargo to be dismantled because it was too big to manage.
She called the sales abuses "some of the most egregious fraud we have seen since the foreclosure crisis." After the hearing, the California lawmaker told reporters she would introduce legislation to break up Wells Fargo.
The bank has said as many as 2 million accounts may have been wrongly opened and Stumpf promised to undo any harm to customers.
The chief executive said, however, that Wells Fargo did not expect to see disgruntled bank customers in court.
Wells Fargo is offering arbitration for its unhappy clients, Stumpf said. Pushed about whether he would waive that mandatory arbitration rule and allow customers to sue, Stumpf said: "No."
Members of the House Financial Services Committee blasted Stumpf over the bank's culture, his compensation and whether the right people were being punished for opening fee-generating, phantom accounts.
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. Stumpf again heard lawmakers calling for him to step aside.
Jeb Hensarling, the Republican chairman of the committee, said in his opening statement he had lost faith in Wells Fargo, which does some of his banking.
"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."
Wells Fargo shares fell 2.07 percent to $44.37. Since Sept. 7, the last trading day before the scandal broke, its stock has lost 11 percent, or about $27 billion in market value, based on Reuters data. The stock is trading at its lowest since early 2014.
Republicans on the committee have often advocated easing Wall Street regulations, but they were among Stumpf's strongest critics at Thursday's hearing.
Asked by Representative Sean Duffy, a Republican from Wisconsin, about whether Wells Fargo employees 'stole,' Stumpf said: "In some cases, they did."
"I am deeply sorry that we didn't do the right thing," Stumpf said in response to a lawmaker who said the scandal had eroded the bank's market value.
Representative Steve Pearce, a Republican from New Mexico, faulted Stumpf for saying the company's board could eventually be relied on to sanction the executives responsible.
"I, sir, think you ought to submit a resignation and your board cannot hold off action on that," he said.
Representative Brad Sherman, a Democrat from California, asked the committee to summon other Wall Street chiefs, including from Citigroup Inc and Bank of America Corp, to determine if they had imposed sales demands and quotas on their employees.
"I don't think, Mr. Stumpf, that you should be alone in this joyous experience," Sherman said.
Stumpf said the bank was strengthening oversight of sales tactics, changing procedures for issuing credit cards and had 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 chief executive officer.
Democratic Representative Carolyn Maloney of New York 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 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.
While Wells Fargo may be shielded from some customer actions, the bank may just be starting to face heightened regulatory scrutiny.
On Thursday, the bank agreed to pay the Justice Department $4.1 million to resolve allegations it illegally repossessed cars owned by U.S. service members. In a separate settlement of similar allegations, the bank will pay a $20 million settlement with the Office of the Comptroller of the Currency.