On Tuesday, Massachusetts Senator Elizabeth Warren took a break from attacking Donald Trump to do what she does best: attack the big banks. This time, the subject of her ire was Wells Fargo CEO John Stumpf, whose bank was hit with a $185 million fine after it was caught creating millions of fake bank accounts and assigning them to customers. An estimated 5,000 bank branch employees have been fired for opening over 1.5 million phony bank accounts and 565,000 credit card accounts in unsuspecting customers names.
During a Senate Banking Committee hearing, Senator Warren joined panel Chairman Richard Shelby (R-Ala.), Sherrod Brown (D-Ohio) and others to grill Stumpf about his knowledge of and participation in the scam. Warren’s cross-examination was particularly tense, as the senator had to repeat her questions three or four times before they were answered to her satisfaction.
“Mr. Stumpf, the Wells Fargo Vision and Values statement, which you frequently cite, says ‘We believe in values lived not phrases memorized. If you want to find out how strong a company’s ethics are, don’t listen to what its people say, watch what they do,'” Warren quoted. “So, let’s do that. Since this massive years-long scam came to light you have said repeatedly, ‘I am accountable.’ But what have you actually done to hold yourself accountable? Have you resigned as CEO or chairman of Wells Fargo?” Stumpf admitted that he had not resigned, nor had he returned any of his earnings to the company or fired any top executives.
“You haven’t resigned, you haven’t returned a single nickel of your personal earnings, you haven’t fired a single senior executive,” Warren said. “Instead, evidently, your definition of ‘accountable’ is to push the blame to your low-level employees who don’t have the money for a fancy PR firm to defend themselves. It’s gutless leadership.”
Warren went on to decry Stumpf for his bank’s reputation for cross-selling and explained Wells Fargo’s rationale for pushing their employees to pressure existing customers into opening new bank accounts.
“Wells measures cross-selling by the number of different accounts the customer has with Wells. Other big banks average fewer than three accounts per customer. But you set the target at eight accounts. Every customer of Wells should have eight accounts with the bank. And that’s not because you ran the numbers and found that the average customer needed eight banking accounts, it is because ‘eight rhymes with great.’ This was your rationale, right there in your 2010 annual report. Cross-selling isn’t about helping customers get what they need — if it was, you wouldn’t have to squeeze your employees so hard to make it happen. No, cross-selling is all about pumping up Wells stock prices.”
It wasn’t the last time Warren eviscerated Stumpf using his own words. At one point, she held up the transcripts of 12 quarterly earnings calls that he participated in from 2012 to 2014. “These are calls where you personally made your pitch to investors and analysts about why Wells Fargo is a great investment, and in all 12 of these calls, you personally cited Wells Fargo’s success at cross-selling retail accounts as one of the main reasons to buy more stock in the company,” she said, proceeding to read the CEO a series of his own quotes. Warren attributed Wells Fargo’s huge cross-sell numbers to the scam.
“Do you know how much the value of your stock went up while this scam was going on?” Warren asked. Stumpf insisted that cross-selling is “not a scam,” but rather “a way of deepening relationships.” But Warren would not be deterred. She repeated the question, and Stumpf told her she could find her answer in the bank’s public filing.
“You’re right, it is all in the public records, because I looked it up,” Warren replied. “While this scam was going on, you personally held an average of 6.75 million shares of Wells stock. The share price during this time period went up by about 30 dollars, which comes out to more than 200 million in gains — all for you personally!”
“Here’s what really gets me, Mr. Stumpf,” Warren went on. “If one of your tells took a handful of 20 dollar bills out of the cash drawer, they’d probably be looking at criminal charges for theft. They could end up in prison. But 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. And when it all blew up, you kept your job, you kept your multi-million 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.”