Tuesday, September 20, 2016

LIVE: Wells Fargo CEO gets grilled by the Senate – Business Insider

john stumpf Wells Fargo CEO John Stumpf. Win McNamee/Getty Images

Wells Fargo CEO John Stumpf is in front of the Senate Banking Committee at 10 a.m. ET on Tuesday to answer question about fraudulent accounts opened by Wells employees.

2 million checking and credit card accounts were opened from 2011 onward by Wells Fargo employees without the knowledge of customers. The accounts were created in order to generate fees for Wells, as well as for employees to meet aggressive sales targets.

The Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency, and the Los Angeles prosecutor all went after Wells for the practice and settled for a $ 185 million fine.

Representatives from the CFPB and Office of the Comptroller will be present for the hearing.

10:00 – Sen. Richard Shelby (R-AL), the chairman of the committee opened the meeting and notes the penalties against the firm and the comments from former employees on the “high pressure” sales environment at Wells. “I’ve often said that banking is based on trust, and trust was broken at Wells Fargo,” said Shelby.

Shelby also questioned why regulators took until 2015 to release information on the unauthorized accounts and when they knew of the accounts.

10:06 – Ranking member Sen. Sherrod Brown (D-OH) said that Wells Fargo was defrauding customers of their “hard earned money” to “enrich executives” and noted that the firm has not “admitted to responsibility for misdeeds.” Brown also claimed that the firm has been “downright hostile” towards customers who have faced these issues.

Brown also claimed that employees at Wells Fargo worked overtime off-the-clock and “cut corners” in order to meet the tough sales guidelines at Wells. “You would think you would have taken the lessons of the financial crisis to heart given the high cost to this country,” said Brown.

“This was not a mix up under the Christmas tree. This was fraud, fraud that you did not find, or fraud that you did not fix quick enough,” said Brown, addressing Stumpf.

10:13 - Stumpf began his prepared remarks, the remarks were previously released on Monday by the New York Times.

“I am deeply sorry that we failed to fulfill our responsibility to our customers, to our team members and to the American public,” said Stumpf in his prepared remarks.

Additionally, Stumpf said  that the issues with opening accounts were not a systemic issue created by the upper levels of the firm.

“I do want to make it clear that there was no orchestrated effort, or scheme as some have called it, by the company,”  said Stumpf.  “We never directed or wanted out employees, whom we refer to as team members, to provide products and services to customers they did not want or need.”

10:18 - Stumpf announced three new measures that the bank will undertake beyond what has already been undertaken. They are:

  1. Expanding their review for possible improper accounts to 2009 and 2010.
  2. Contact every customer to make sure that they wish to have all of the products they currently have with the bank.
  3. Contact every credit card customer to ask if they wish to have their credit card, similar to the practice wells undertook in California previously.

10:24 - Stumpf said that the bank did not know if the fraudulent account activity had occurred before 2011, and that is why the bank was extending their review to 2009 and 2010.

10:26 – Stumpf said the business was dealing with the issue for a number of year before he knew of the issue. “If I could turn the clock back, I, we all, wish we had done something earlier,” said Stumpf. Stumpf said that he and other senior executives found out about the issue in 2013, but it was dealt with with lower-level management before that time.

10:29 – Stumpf defended the compensation that Carrie Tolstedt, the head of community banking that oversaw the fraudulent activity, received upon her retirement in July. Stumpf said that Tolstedt did not receive any severance upon her retirement in July, but the reported $ 125 million in compensation she received was from previous stock compensation.

10:32 – Sen. Shelby asked Stumpf about the customers trust in Wells Fargo and whether it was violated. “There is no question with some of our customers we have violated that trust and we will work hard to rebuild that,” said Stumpf.

10:34 – Stumpf said Wells Fargo would consider going back beyond 2009 to see if fraudulent activity occurred.

10:39 - Most of the people that were laid off were in “good-paying jobs” according to Stumpf including bankers and one regional president. Stumpf also said he would not make a recommendation whether the board of directors should clawback any of the up to $ 125 million in stock compensation for Tolstedt.

Stumpf also said that Wells Fargo brought in PriceWaterhouse Coopers to review the possibility of fraudulent accounts in August 2015 at the recommendation of regulators, not completely of its own accord.

10:42 - Sen. Brown asked why PWC was not brought in prior to 2015 when there were indications, including a Los Angeles Times article in 2013, that there were accounts being opened.

10:44 - Sen. Bob Corker (R-TN) said that not clawing back some of Tolstetdt’s stock compensation would be “malpractice” of public relations for all involved.

Stumpf said that the board of directors was made aware of possible issues in late 2013 or early 2014, but did not know if it was triggered by the LA Times article.

10:47 – “It got to the board level in 2013 because progress was not being made,” said Stumpf in noting the amount of knowledge Tolstedt had over about opening of fraudulent accounts. “It was based on a number of issues, this was one of those issues,” said Stumpf when asked by Corker whether Tolstedt left over the accounts.

10:50 –  Stumpf said there were a number of initiatives to enforce and emphasize ethics when the possibility of fradulent accounts being opened came to light. “However it was not fast enough, not far enough, and I apologize for it,” said Stumpf.

Since the fine, Wells has generated a significant political backlash from Democratic Senators including Elizabeth Warren and even prompted Democratic presidential nominee Hillary Clinton to write an open letter regarding the scandal.

“There is simply no place for this kind of outrageous behavior in America,” said Clinton in the letter.

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