WASHINGTON (CN) – As members of the House Financial Services Committee compared him to a common bank robber and threatened to level RICO charges or worse against him, disgraced Wells Fargo CEO John Stumpf offered another mea culpa for his role in the company’s fraudulent banking practices.
“You screwed student loan holders, credit unions, Fannie Mae, Freddie Mac, mortgage holders, African Americans, Hispanics, healthcare workers, on and on and on,” said Rep. Michael Capuano of Massachusetts.
“When prosecutors get a hold of you, you’re going to have a lot of fun,” the Democrat added, his voice echoing loudly throughout the chamber.
He then held up a photo of Robert Holmes, a man charged with robbing a Wells Fargo Bank in Lancaster, Pa., last year and stared squarely at Stumpf.
“Do you know this guy? He robbed your bank. He didn’t use a weapon, but he got caught, they got all the money back and now he’s in jail on $750,000 bail, Capuano said.
“You on the other hand have run an enterprise with a culture of corruption, encouraged subordinates to abuse existing customers, charged those victims illegal fees, interest and late charges, and then sent their accounts to collection agencies if they didn’t pay,” he said.
Capuano and several other committee members accused Stumpf of firing 5,300 people merely to cover his own tracks in the widespread mishandling of customer accounts.
“You and your entire leadership team are guilty of conspiracy to commit fraud, identity theft, racketeering and a dozen other crimes,” Capuano told Stumpf pointedly. “But I still have one simple question: what the heck is the difference between you and Mr. Holmes? Why shouldn’t you be in jail? He didn’t use a gun, you got the money back and he said he was sorry. What’s the difference? Why shouldn’t you be in jail?”
Stumpf responded by repeatedly expressing his dismay over the behavior of branch employees who he blamed for the schemes that increased Wells Fargo profits at the expense of its own clientele.
The committee demanded to know why Stumpf did not stop the fraud earlier and, picking up the line of questioning that Sen. Elizabeth Warren, D-Mass., pursued last week when the CEO appeared before the Senate Banking Committee, asked him why he did not stop bogus business practices that had been evident as far back as 2009.
Stumpf said that the bank is implementing a new set of best practices for its employees and operations, some of which will begin as early as Friday.
“We have announced the elimination of product sales goals for everyone in retail banking effective January 1, 2017, and we’re accelerating the end of all product sales effective at the end of this week. Nothing should get in the way of doing what is right for our customers,” Stumpf said.
Stumpf said the 164-year-old bank has also adopted of new policy of sending confirmation emails to customers within an hour of the opening of a Wells Fargo savings or checking account in their name, and of sending an acknowledgement letter after a customer applies for a credit card.
Stumpf said since last week’s senate committee hearing, nearly 20,000 Wells Fargo account holders have been notified of bogus accounts or credit cards opened in their names and given the option to retain or surrender them.
“For anyone who does not want an account, we’ll close it and inform the credit bureaus. Any fees these customers may have paid have already been refunded and deposit customers have also received refunds on fees,” Stumpf said.
But these steps appeared not to satisfy the committee. Committee chairman Rep. Jeb Hensarling of Texas told Stumpf he has a mortgage with Wells Fargo and that he’s struggling to see how he could ever trust the bank again.
The Republican was far from alone in the distrust he feels for the bank, or in the impatience he expressed toward its CEO on Thursday.
Rep. Maxine Waters of California, the ranking Democrat on the committee, suggested that more may be amiss at Wells Fargo than its becoming a bank that’s too huge to manage. She said Stumpf may just not have his eye on the ball anymore.
“Maybe the reason you don’t know some of the details is because you also sit on another of other big boards, including that of Chevron, at $375,000 per year … You sit on board of Target Corporation, for $272,000 per year … and you’re responsible to them,” Waters said.
“In addition, during this hearing, Bloomberg sent out an alert that you’ll be facing a $20 million penalty for improperly repossessing cars from members of the military,” she continued. “It appears [Wells Fargo] can’t make it through a congressional hearing without our learning more and more about what is going on at this company.
“I appreciate the claw back and all of that, but I have come to the conclusion that Wells Fargo should be broken up … and I’ll be working with the committee and you to see that happen,” Waters said.
Rep. Al Green, a Democrat from Texas, opined that “with $5.6 billion earnings [at Wells Fargo], this was not about need, it was about greed.
“The same greed that created credit card default swaps, no-doc loans, pre-payment penalties that coincided with teaser rates,” Green said. “The same kind of greed that created the housing bubble is the greed that has created this cross-selling bubble.”
Cross-selling is generally defined as the action or practice of selling an additional product or service to an existing customer.
Stumpf defended cross-selling at Wells Fargo, saying that while $2.6 million in fees were levied against its customers, the bank itself took a $10 million hit in costs to maintain the accounts and described the operation as a “dismal one.”
The committee offered him little sympathy after this admission.
“I understand you lost $41 million of your salary recently, which is only about a quarter of what you have made over the last 10 years, so you’ll forgive all of us if we don’t really feel that sorry for you. Under Dodd-Frank, Wells Fargo remains fully eligible for tax payer bailouts should you run into trouble going forward,” said Rep. Scott Garret, a Republican from New Jersey.
“Taxpayers have already spent a lot of money bailing out Wall Street firms and I’m sure you’re aware of the anger that is directed at you, and at employees, because [taxpayers] are forever on the hook to underwrite risky or fraudulent activities Wells Fargo or other banks may engage in,” he added.
Stumpf insisted he is “not a criminal” and said that he “led the company with courage.”
“You took advantage of unsuspecting, loyal customers. People in almost every single district represent this committee and you’re the chief executive officer. You should be downright ashamed of yourself … if you have any respect for people of the U.S. or for the customers you have defrauded with the rancid example you’re setting, and the harm that has been done to the entirety of the banking industry … you have caused an extraordinary spotlight to be focused on every bank in this country,” said Rep. David Scott, a Democrat from Georgia.
Rep. Carolyn Maloney, a Democrat from New York, entered a stock sales agreement into the hearing record that showed Stumpf sold $13 million in company stock at about the same time he now admits he became aware of fraudulent activity related to customer accounts.
“This was the largest open market sale of Wells Fargo stock that you made in your nine years as CEO,” Maloney said. “My question is, did you dump $13 million right after you found your bank had been opening hundreds of thousands of scam accounts?”
Stumpf hesitated before answering, but finally conceded, “If I did, it was with proper approval.”
“It seems suspicious,” Maloney said. “And it seems when you found out about the accounts, instead of helping your customers, you first helped yourself.”
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