WASHINGTON — The most anticipated face-off of Tuesday’s Senate Banking Committee hearing did not disappoint: Democratic firebrand Sen. Elizabeth Warren grilled Wells Fargo CEO John Stumpf in a blistering exchange where she accused him of “gutless leadership.”
In two turns behind the microphone, Warren, of Massachusetts, excoriated Stumpf, repeating questions to try to get him to answer them, turning the bank’s own words against him, and using the opportunity to make a moral case for banking reforms.
The San Francisco-based bank has been in lawmakers’ crosshairs since being fined $185 million earlier this month after thousands of the bank’s employees created up to 2 million fake accounts — from credit cards to checking accounts — to meet sales goals. In some cases, bank customers faced various fees for accounts they didn’t request, or bank employees took money from an authorized account to create a fake one.
Wells Fargo fired 5,300 employees between 2011 and 2016 for the scheme, including some managers and “one area president,” Stumpf said. The bank will review whether the conduct could have occurred before 2011, he said. “We don’t want to leave any stone unturned,” Stumpf said.
During the hearing, senator after senator expressed astonishment that the creation of unauthorized deposit and credit card accounts by Wells Fargo employees could have gone on for so long without more assertive action by senior management. But Warren turned that line of questioning personal, suggesting the “cross-selling” strategy that prompted some employees to make the phony accounts enriched Stumpf’s own stock portfolio.
In one tense exchange, Warren demanded that Stumpf explain why he had not offered to give up any of his compensation – he made $19 million last year – or resigned in the wake of the scandal. She noted that Stumpf repeatedly touted Well Fargo’s ability to sell more and more products to customers in quarterly calls with analysts, and then watched as investors pushed up the bank’s stock price, generating gains that increased his own holding by about $200 million over several years.
“While this scam was going on, you personally held an average of 6.75 million shares of Wells Fargo stock,” Warren said. “The share price during this time went up by about $30, which comes out to more than $200 million in gains, all for you personally,” Warren said.
“Evidently your definition of accountable is to push the responsibility” to low-level, low-wage workers, Warren said. “It is gutless leadership.”
Warren’s plain-language questions, context-setting remarks and call for tough penalties show why she has become such a feared figure among Wall Street executives. “You should resign,” Warren said at the end of a near-monologue about the broader failures of the banking system. “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.”
Stumpf, who has been at Wells Fargo for more than 30 years, repeatedly apologized for letting down customers. But the questioning was often tense, and Stumpf was interrupted and chastised by lawmakers for not catching the problem sooner.
“I am deeply sorry that we failed to fulfill our responsibility to our customers, to our team members, and to the American public,” Stumpf told the committee. “I have been with Wells Fargo through many challenges, none that pains me more than the one we will discuss this morning.”
In his responses, Stumpf was either frequently interrupted or forced into answers that had him repeating his talking points again and again. “Have you returned one nickel of the millions of dollars that you were paid while this scam was going on?” Warren asked three times, before unleashing repeated questions about whether Stumpf had fired any senior executives.
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