Wells Fargo CEO’s Teflon Don Act Backfires at Senate Hearing; “I Take Full Responsibility” Means Anything But

It’s a safe bet that Wells Fargo CEO John Stumpf will be turfed out in the next ten days. Not only did he break the cardinal rule of executive survival, namely, throw someone under the bus when the going gets rough, but he couldn’t even manage a credible show of contrition and groveling after a massive fraud took place on his watch.

As one Senator noted, the Wells Fargo fake accounts scam achieved a difficult feat: “For the first time in ten years, you have united this committee, and not in a good way.” Even Republicans like Paul Toomey used the “f” word, as in “fraud”.

The chamber was packed, and the toughest interrogation came from Sherrod Brown, Bob Menendez, and of course, Elizabeth Warren, who reached new levels of bad-assery. For instance, the Massachusetts senator pointed out that Stumpf had gotten $200 million in gains on his Wells Fargo shareholdings while this fraud was underway and demanded that he pay it all back. Too bad she didn’t add that he could easily have paid the restitution to consumers of a mere $2.4 million himself.

Some of the revelations:

Wells Fargo had obvious, glaring control deficiencies that appear designed to give Stumpf and his fellow execs a “whocoulddanode?” excuse. The main audit functions sat in the business units, not the at the corporate level. It is a basic failure to have control functions report into profit centers. This is the structure that led to JP Morgan’s London Whale debacle and elicited incredulous reactions all over Wall Street. Tom Curry of the Office of the Comptroller confirmed that this was a serious deficiency. But that begs the question: how did regulators give this foxes run the henhouse organization a free pass?

Despite saying he’d take full responsibility, Stumpf did nothing of the kind. Even though the press had already found a branch manager (who was later fired) warning him of abuses in February 2011, he says he didn’t have any idea there was a problem until sometime in 2013. Stumpf kept insisting there was nothing wrong with the bank’s culture, which elicited derision: did 5,300 employees really join Wells Fargo just for the fun of forging signatures and making up fake e-mail addresses? The CEO kept insisting the 5300 fired employees were bad apples, leading to the retort by Menendez:

This isn’t the work of 5,300 bad apples, this is the work or result of sowing seeds that rotted the whole orchard,You and senior executives created an environment where a culture of decrepit thrived.

Several Senators argued in some detail how it was absurd to expect low wage workers with families to buck the pressure of Wells Fargo’s absurd sales targets with the threat of firing over their heads. In yet another proof of how out of touch he was, Stumpf tried arguing that these were good-paying jobs, which the Senators again disputed, pointing out that the overwhelming majority of people who were canned were at the bottom of the food chain and $35,000 to $60,000 per year wasn’t something to brag about.

And the regulators agreed. The Los Angeles City Attorney said Wells had an “excruciatingly high pressure” sales culture, and Richard Cordray of the Consumer Financial Protection Bureau concurred, separately using the word “excruciating.”

Another intelligence-insulting theme was Stumpf’s hollow declaration that “I am fully committed to fixing this issue.” Several Senators raised the issue of the cost of credit score damage, which can come about by the mere act of having a bank request a credit report for the purpose of getting a credit card. They asked if Stumpf intended to make customers whole who’d wound up paying higher costs on mortgages and other loans. Stumpf said he’s take it under advisement, and was similarly non-committal about addressing the harm done to employees who’d bucked the unreasonable sales targets and were fired as a result.

Stumpf refused to consider clawbacks. Stumpf will go down over this issue. He’s clearly more attached to keeping his gains than keeping his job. But what was revealing was his refusal to entertain them even for the conveniently recently retired Carrie Tolstedt, who is leaving with an exit package of an estimated $125 million in cash and equity prizes. Note that the financial press has reported that $17 million could be clawed back under the bank’s rules. When pressed, even though Stumpf kept maintaining the party line that Tolstedt had resigned, he said that the bank “wanted to go in a different direction” which is code for “she was forced out”.

Senate Banking Committee chairman Richard Shelby rejected Stumpf’s refusal to consider clawbacks: “Explain to the public: What does accountability look like when an executive departs with millions of dollars?”

Warren blasted Stumpf for not firing Tolstedt, pointing out that she would have been paid $45 million less:

You really have to watch this exchange. Warren flays Stumpf for the fact that Tolstedt is eligible for a 2016 bonus by virtue of not having been fired, and to add insult to injury, he refuses to make a recommendation to the compensation committee of any sort. And he denies that a massive fraud occurred.

Some of the actions look to set up a criminal case. I’m getting out in front of serious legal analysis, but some of the actions were so rancid that they would seem to set up criminal charges. The San Francisco bank would transfer money from deposit accounts to cover fees in unauthorized credit card accounts. In addition, bank employees would forge customer signatures to create phony accounts.

In many ways, this is worse than the robosigning scandal, since the signatures were thousands of fakes of a single mortgage servicer or law firm employee, who presumably was in on the con or would not have objected. It was still a fraud on the court, since the affidavits in question affirmed personal knowledge, where there was often none even if person whose signature was robosigned had made all those signatures him or herself. But forging customer signatures on a widespread basis is another kettle of fish entirely.

Other bad actions fall into the “serious chutzpah” category. For instance, one of the products the bank sold was fraud protection…and it appears the bank committed fraud on the very accounts on which is sold protection. The bank has also insisted that customers go into arbitration, arguing that the mandatory arbitration clauses on real accounts apply to the bogus ones too.

Stumpf conned the Senators and regulators about his credit score remedy, which is not about helping customers, but more damage control by the bank. Stumpf was pressed repeatedly on how he’d repair customer credit scores. And the correct answer isn’t hard: tell the credit agencies for each and every one of the over 500,000 credit cards that the credit reports should never have been pulled on them and that any late charges were the bank’s fault.

But that isn’t what Wells Fargo is planning to do. Stumpf instead said the bank will go through the far more labor-intensive effort of calling each and every customer! Now why would the bank do that?

To sell them again! That is, to try one more time to arm-twist the customers into saying that they will keep the cards, even if Wells faked their application. Several times, Stumpf took the position that the bank didn’t know how many accounts were part of the scam, but they came up with the 2 million total (roughly 1.5 million bank accounts and another 560,000+ credit card accounts) to make sure that they got every one that might be fraudulent. In other words, the bank is taking the position that many of those accounts might be legitimate, and is trying to take another pass at making that look true.

If I were a financial regulator or Elizabeth Warren, I’d demand the scripts that the call center employees will be using to, um, placate customers.

You could see the set-up at work at several points of the hearing. For instance, a Senator pressed Stumpf on whether the bank as a matter of course put customers into products they hadn’t asked for. Stumpf refused to give a straight answer. The Los Angeles City Attorney picked up on that issue in the later panel, pointing out that early in his investigation, Wells Fargo’s position was that these customers needed these products whether they asked for them or not.

Even though it is frustrating for those of us who have been chronicling bank misconduct over the years to see this case be the one that galvanizes regulators, Congress, and legislators, since even though it involved huge numbers of customers, the damage for they suffered was not all that bad when you consider other bank scams that hurt millions of citizens far more deeply, such as fraudulent mortgage lending and foreclosures, debt collection abuses, and payday loans, there is still significant benefit to this rot being unearthed.

First, the odds seem decent that there will be a criminal prosecution, at least of Carrie Tolstedt. By all accounts she was a micromanager. And with so many employees, including some high level ones like regional presidents having been fired, there will be plenty of people to provide evidence. Look at how easy it was for the Wall Street Journal to get over three dozen bank employees at various levels, including senior ones, as sources for a story last week. And given that Tolstedt would have been the logical party for Stumpf to throw under the bus, there are only a couple of reasons I can come up with as to why he didn’t. First (and this is very likely) her separation agreement contains a very stringent non-disparagement clause. But second, it is also certain that if Tolstedt is the target of a criminal investigation, and her attorneys think she is at real risk of losing, the logical path for her is to cut a deal in return for testimony against Stumpf and her boss, the president. So Stumpf is defending her to defend himself. By contrast, Jamie Dimon was in a similar position with the head of JP Morgan’s Chief Investment Office, Ina Drew. But she was still on the payroll. So he could appease bank critics by tossing her over the side.

While one prosecution of a highly-paid bank exec may not seem like much, it’s easy to forget that one thing middle and upper class people really are afraid of is going to jail. You can see in the exchange with Warren that Stumpf finds the premise of her outrage to be incomprehensible. People of his stature, like Tolstedt, are entitled to special protection like solicitous treatment behind closed door, and minimization of embarrassment even when they are cast out. By contrast, lower level employees are tissue paper, to be tossed aside without further thought when they are no longer useful. Stumpf can’t even begin to see his deeply internalized assumptions about class and rank.

In the Great Depression, only one senior banker went to jail, Richard Whitney, who had been head of the New York Stock Exchange. Whitney’s was a clear-cut case of embezzlement, of borrowing against customer assets to fund his lavish lifestyle. In contrast to today, when Whitney’s fraud was unearthed, he was referred to prosecution almost immediately. He admitted his guilt and went to some length to exculpate his accountant, who he had pressured into cooperating.

Even though the ethical norms were vastly higher then than now, the spectacle of Whitney’s fall was riveting, and was a chilling warning to other members of his class that no one was above account. It will be much harder to make a dent on diseased banking industry ethics, but retail banking is widely seen as have so much less wriggle room for bad actions compared to wild and wooly Wall Street that the spectacle of retail bankers in the dock would send a message that the days of financiers being a protected class are numbered.

Second, the Wells Fargo fraud will make it hard for the Republicans to roll back bank reform. The Wells Fargo debacle is sure to remain in the press for weeks, if not longer. This scam, and the display of executive intransigence in its prettied up Stumpfian embodiment strengthens the hand of Elizabeth Warren, Sherrod Brown, and other bank reformers. Even with a Trump presidency, it vitiates the case for rolling back Dodd Frank, since the big objective of that effort was to kill the Consumer Financial Protection Bureau. Even though Warren was a bit too gleeful about the role of the CFPB, the Los Angeles City Attorney, which did the serious spadework that got this case going, said his investigation was critically dependent on the CFPB’s consumer complaint database.

So as Lambert likes to say, pass the popcorn. Wells Fargo will provide more revealing theater as well as a vivid proof that banks need stringent oversight. The real message of Wells, from the cheap pass it got on its mortgage servicing abuses to its comeuppance on its account fakery, is that banks, especially commodity areas of banking like retail banking, can’t generate outsized profits or growth honestly. For the benefit of all of us, they need to become boring again, either by breaking them up or regulating them like utilities.

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  1. rusti

    While one prosecution of a highly-paid bank exec may not seem like much, it’s easy to forget that one thing middle and upper class people really really are afraid of is going to jail. You can see in the exchange with Warren that Stumpf finds her outrage to be incomprehensible. People in his circle, like Tolstedt, are entitled to special protection like solicitous treatment behind closed doors, and minimization of embarrassment even when they are cast out. By contrast, lower level employees are tissue paper, to be tossed aside without further thought when they are no longer useful. Stumpf can’t even begin to see his deeply internalized assumptions about class and rank.

    In the Great Depression, only one senior banker went to jail, Richard Whitney, who as the former head of the New York Stock Exchange was a household name.

    While I’d be content with even some minor attempt at holding executives to account for criminal behavior, is there any chance that Stumpf or Tolstedt could be sent to anything other than a minimum security prison? Or is the primary deterrent with criminal conviction the risk of loss of status in upper class social circles?

    According to Wikipedia, Whitney was sentenced to 5-10 years and served just over 3 in Sing Sing, a maximum security facility.

    1. Yves Smith Post author

      I don’t think there is any way Stumpf is going to jail. He might be targeted for a criminal investigation if Tolstedt cuts a plea deal and can serve up real dirt on him. But if he were prosecuted, as opposed to merely investigated, it would tie up years of his life, be very stressful, and leave his reputation in tatters, and guys like him do care about their legacies. At the age of 63, losing years is a real cost. Tolstedt is vulnerable by virtue of being the one who had audit report to her, as in she had the facts at hand, and also was very controlling.

      Even minimum security is no party. Martha Stewart did six months and even though she puts a brave face on it, she fought until it was clear that more fighting would make matters worse.

      1. Skippy

        “He might be targeted for a criminal investigation if Tolstedt cuts a plea deal and can serve up real dirt on him.”

        Is that why she got made whole and retired with full honors regardless of the public optics….

        1. Yves Smith Post author

          No, they were really dumb to let her retire. They no doubt signed some sort of confidentiality agreement and her lawyers probably also got Wells to agree to a story line about her performance when she worked there. This is pretty normal when high level people are forced out. In the new form of them, the participants are enjoined from even admitting that there is a confidentiality agreement.

          However, a prosecution can open them up. Regulators probably can too. But her resignation could have been a bone thrown to them. Remember, they were all chuffed about getting $185 million and it now looks inadequate given the uproar about the need to punish execs.

          But she left with her pay intact. No way is she gonna give that up voluntarily. Stumpf & Co gave away their bargaining leverage by letting her quit, thinking the scandal was no big deal and there would be no reaction to a pissant $185 million settlement.

          1. Skippy

            Well considering the clumsy antics to date I’m not surprised about anything.

            Can too much money and lack of fear rob such entities of any functional institutional memory, made manifold by revolving door, network reinforcement, et al, like devolve into some kind of group psychosis.

            Serious question.

            Disheveled Marsupial…. its like watching white collar coke cartels after doing to much of their own product – after a period of time…. all over again…

          2. Synoia

            But she left with her pay intact. No way is she gonna give that up voluntarily. Stumpf & Co gave away their bargaining leverage by letting her quit….

            Appears to open up a conspiracy charge against all of them.

            1. Procopius

              Yeah, but that would presume a prosecutor who cared and really wanted a scalp. I don’t see who that might be. Preet Bharara? Well, there’s a thought. If Loretta Lynch doesn’t step in to shut things down. I suspect she’s hoping to join her former boss at Covington & Burling, and prosecuting Stumpf might not enhance the chance of that. Maybe I’m being overly cynical, but despite her previous record as a prosecutor, I haven’t been well impressed by her performance as AG.

              1. OpenThePodBayDoorsHAL

                Why would a bank worry about acting dumb, in this context or any other for that matter? They operate in a sphere that is hermetically sealed against any intrusion from the pesky realities of good business sense or those inconvenient things the rest of us call “laws”. They’re completely innoculated against both free-market capitalism and the Constitutional rule of law, it’s a different meaning of the term “bubble” because theirs is bullet-proof glass and entirely unpiercable. Stumpf can retire without a care in the world and jump up and down on his piles of money on his bed like Jordan Belfort

              2. Yves Smith Post author

                Preet is on this case. The Southern District of NY and the Northern District of CA are investigating. And the reason to be hopeful is that the united Dem/Rep outrage at the Senate is a sign that the elites recognize that they are having a legitimacy crisis (witness the rise of Sanders and Trump) and Wells Fargo is a way to shore up appearances regarding accountability.

          3. Richard Davet

            Despite the fact that we all enjoy this sort of theater isn’t it pathetic that it took news reporters listening to whistle blowers to get the regulator’s asses in gear? Two plus million people scammed where were the regulators?

            If Tolstedt was the mother of the the “cross selling business model, she was meeting with Stumpf weekly according to his testimony. They were not chatting about the weather. They were talking about in depth about the numbers that each were rewarded handsomely. Unfortunately for them the Model evolved to a point that the fudging the numbers necessitated fraud instead of developing a best practices routine.

            Tolstedt and Stumpf no doubt have at least a half dozen staff ready to take over the Model and do a superficial cleanup for appearances to get the press off their backs before screwing the customers again. Call it “fraud fatigue” on the part of the public that will set in before they resume. Same thing that is going on at the GSEs.

            The one and only thing that will stop it is jail for the simple sham that it is. Stumpf is no more that a farm boy gone bad. Sad but true.

            1. Yves Smith Post author

              Tolstedt wasn’t the “mother of the cross selling model”. That came from ex Citi exec Richard Kovacevich, who came from Norwest. Norwest actually acquired Wells, but kept the better-known Wells name (same with Chase and JP Morgan).

              See here for details:


              But Tolstedt was running the relevant part of the bank on a day to day basis for the entire period of the fraud. And the compliance unit reported to her. So the question will be why didn’t she and Stumpf stop this cold once they took note? It’s come out that the bank supposedly 1000 people for the scam in 2011 (although per above the new claim seems to be they fired fewer people later…so just like the varying estimates of how much Tolstedt got when she retired, we don’t seem to have a definitive story on when these 5,300 firings took place). All they had to do was say that any manager caught with people under him doing certain things, like forging signatures or opening more than X% (number that had been historically normal) of no-activity accounts would be fired. If they were as tough on anti-fraud #s as they were on their nutty goals, this would have stopped in its tracks.

              1. Richard Davet

                The concept of cross selling at banks dates back to the early 50’s even though they may not have named it so. Nothing new—-only unreported history.

                My point was that Ms. Tolstedt was the “mother of cross selling at Wells Fargo” and as so the discussions revolved around performance. eg “How much can we do next week?”. The Model was in place and operating according to design (by Stumpf and Tolstedt, et al ). The Model was tweaked for years and then imploded as a result of the fraudulent activity in the designed Model by bankers who felt their bread was buttered by screwing customers/shareholders, etc. instead of the reverse.

                Simple, they designed it, they operated it, they benefited by it—-now is the time for jail as a result of their imprimatur.

                1. Yves Smith Post author

                  No, she was NOT the “mother of cross selling at Wells Fargo”. Go read the link. Even an ex-Wells commentor flagged that Kovacevich was responsible early on. He was even the guy behind the barmy “eight is great” campaign that Stumpf flogged.

                  However, the real culprit has been safely retired from Wells Fargo Bank for some years now. It is former senior Citibank executive Dick Kovacevich who came up with the bumper sticker performance metric for his bank – “The Great Eight”. Eight cross sells per customer.What a horribly failed metric he chose as a proxy for “success” in banking. Unfortunately, the fawning attention from the media and people like Buffett ensured that the banking industry would be swept up in his love for cramming product down the throats of customers. Let’s hope Kovacevich (Theranos board of directors) gets deeply linked to this scandal and the cult around him goes the way of Welch and Greenspan.

                  For some early history read http://archive.fortune.com/magazines/fortune/fortune_archive/1998/07/06/244842/index.htm that includes the following paragraph:

                  “Another of Kovacevich’s key accomplishments is “cross-selling”–getting customers to buy more than one product. It’s the rationale for many of the recent megamergers, like the Citicorp-Travelers deal, but for most banks, it’s been more hope than reality. “Cross-sell is like the Loch Ness monster–always talked about but never seen,” says Kovacevich. Except at Norwest. Today the average Norwest customer buys nearly four products, vs. the industry average of two, which generates $113 per customer in profits for Norwest, about triple the amount a two-product purchase yields. Doubling the average product purchase to eight–Kovacevich’s current obsession–would again triple productivity, but Norwest still has a ways to go. “On a scale from zero to 100, we’re about 30,” Kovacevich admits. For example, under 3% of Norwest’s 3.5 million banking households have a relationship with the company’s brokerage.”


                  1. Richard Davet

                    I read the link to the WSJ article re “cross selling” that is why I made the reference to it dating back to the early 50’s.

                    In fact “cross selling” can be legal and profitable for all who are involved. The issue is the model of cross selling at Wells Fargo (their version) that involved fraudulent activity by design by the players we are talking about.

                    We are talking about who was involved and who designed the monster they now are “sorry” for creating and operating but unwilling to disgorge the ill gotten gains guaranteeing customers be made whole.

      2. vlade

        Would they be able to go after her money as “criminal activity gains” if she was jailed? I’d say so, but don’t know this particular part of the US law well..

          1. Procopius

            I mean, in a sense RICO is not “law,” because it’s entirely arbitrary, and it’s not employed evenly. You can even argue (and maybe this was your point) that “law,” as a system applied to all citizens regardless of class, race, religion, does not exist in the U.S. now. But, still, it’s called “law” and is part of our “legal system.”

      3. John

        Elaine Chao (Senator Mitch McConnell’s wife) has been on the board of Wells Fargo since 2011.

        No one is going to jail.

          1. Yves Smith Post author

            That Podesta Group lobbying didn’t do much to stop the upset at Congress, now did it? There are also House hearings coming.

            Covington has influence but it does not run the DoJ. And you assume that Wells is an important client to Covington. I doubt that it is. More generally, I’m told that banks have a lot less power in DC than they used to. Google now owns Hillary, not Goldman.

            And interestingly, with this the lame duck period, Loretta Lynch, who will offer to quit when the new President comes in (this is the normal protocol) has less sway over people like Preet Bharara than normal. Even though she is his boss, he has direct access to the press, which makes him harder to check if he thinks he has a case and she wants to curb him.

            Now Wells may have been clever enough in how it set up its operation so as to have plausible deniability for the execs. But Stumpf was so clear that he didn’t regard this abuse as big a deal that the odds favor them not having covered their tracks all that well.

            1. Robert NYC

              “Covington has influence but it does not run the DoJ”

              well it did, just ask Eric Holder and Lanny Breuer.

              1. Yves Smith Post author

                They aren’t there any more, and as I pointed out several times on this thread, the banks have way less clout in DC than they did a few years ago. And Wells has never done much to curry favor in that town.

                1. Robert NYC

                  Yes they may not be there but I assume someone similar is. Agree with you about Wells having less influence than its peers and that banks are toxic politically right now. As you note the cross party outrage, the rise of Trump and Sanders, are encouraging signs. Let’s hope this one doesn’t blow over. As for Bharara, he seems to be the real thing. That is what is so interesting. It appears that there are a lot of honest prosecutors in the field but somehow they seem to get restrained a long the way.

                  Warren’s recent letters to Comey and the DoJ’s inspector general is a real shot across the bow and it will be interesting to see what comes of it.

        1. apber

          Don’t forget Uncle Warren and the power he has among the elite oligarchs. He owns a significant amount of WF stock. No one goes to jail; bet on it.

          1. Yves Smith Post author

            Two of Warren’s own executives went to jail in a Berkshire finite reinsurance scandal. That’s a hell of a lot closer to him than Wells Fargo execs are.

            No one is omnipotent.

          2. templar555510

            Yes and where has he been since this scandal erupted . Nowhere . This tubby, cuddly Buffet is no hero . He could have stepped up here and said ‘ off with your head ‘ to Stumpf, but no he’s sat it out presumably hoping the stock and his investment won’t nosedive .

            1. Robert NYC

              I lost all respect for Buffet when he defended Goldman on the Abacus deal, which was indefensible. He talks a big game about ethics until it hits his bottom line, then he clams up. Had a large preferred stake in Goldman at the time.

      4. Synoia

        If Wells Fargo used than money (which it must), it open the entire bank up Money Laundering charges.

        The laws are so entangled it open up Wells and its employees up to charges under of the Bank Secrecy Act, Money Laundering Control Act and the Patriot Act, in addition to fraud.

        The Attorneys win again. Many, many billable expensive hours here.

        Who’s going to be the first, in order to throw the others under the bus?

          1. Procopius

            Has Sarbox ever been invoked? I expected to see it used with Jon Corzine. It was so obviously a no-brainer, a prima facie case, but nothing. Did they ever find the customers’ money and silver bullion?

  2. Ignacio

    I’ve been following this story and I just can say wow! What a good job! I have decided to contribute (small contribution though) in the next fundraising. Not only for this story, but many other posts that are illuminating on how this oligarchic republic (this term can be applied with cultural variations to other OECD countries) functions. I want to make the connection with the latest Hudson’s post in which he narrated the arguments of inequality cheerleaders that justify the fact that these guys deserve the obscene amounts they receive (note I avoided the term “earn”). They are creative and innovative and their stratospheric incomes are just a reflection of the high value they add to society. Puagh!

    I have been thinking on the behaviour of Stumpf that you so well describe and the conclusion I arrive at is that these guys have a mental disorder. It can be defined as “the more I have the best for all” disorder. It can be regarded as a severe psychotic disorder (Wiki: Psychosis refers to an abnormal condition of the mind described as involving a “loss of contact with reality”). No more explanation needed. If this disorder is frequent in, for instance CEOs, something has to be done to prevent it.

    I will not elaborate more on this, but i think it is one of main lessons from this story.

    1. Paid Minion

      These guys create their own reality, one that reinforces their worldview, and dismisses facts that don’t align. People who have views that differ, or point out facts divergent from their version of reality, are shown the door by various methods.

      There’s a lot of this going around lately, especially among the “leaders” of this country.

      I used to have a job at a finance related company. I can remember these clowns coming off the airplane and patting themselves on the back for going “all in” on mortgage backed securities. This was in early 2007, at a time when I’m reducing my exposure to any type of financial asset other than cash, because it was obvious to me that MBSs were going to blow up, and take the economy with them.

      Three billion bucks in losses later, me and the flight department, several hundred “little people”, and the guy that masterminded the deal are kicked to the curb (with a nice severance package/hush fund for him) but the rest of the suits are still there, all singing in the “Whocoudanode” Choir.

    2. larry

      There is another disorder that might fit Stumpf: psychopathy. It is a syndrome with 7 or 8 core features, one of them narcissism. Others are lack of empathy, no conscience, refusal to accept responsibility, and the inability to feel remorse. Now, one can’t be certain with the evidence before us that Stumpf is psychopathic, but he may be what I would characterize as a situational psychopath, that is, a person who exhibits psychopathic traits in certain social situations or when playing certain social roles, as when he is acting as a CEO of WFC or when he goes before a Congressional committee. This would mean that he isn’t a psychopath tout court. There appear to be more and more of these and neoliberalism seems to bring these traits out in certain kinds of people. Robert Lindner, the famous psychiatrist, once contended that there is a little psychopathy in all of us. He may have been describing what I call a situational psychopath rather than what might be termed a “true” psychopath, one who is psychopathic in every situation and in every social role they are associated with. It is a mistake to think that all psychopaths are violent. One can see from his demeanor that Stumpf isn’t physically violent, but he has caused a good deal of emotional damage in others.

      On the other hand, he could be psychotic, as you claim, but he doesn’t look as if he is in the video clips I have seen. He appears to be in complete control, of himself at least, which is a core attribute of psychopaths. While he knows that he will be unable to manipulate Warren, he could easily be attempting to manipulate the other members of the committee by acting in such a reasonable manner to what is an attack on his character. He evades and does not attempt to defend himself, probably because he knows that that will only hurt him.

      It is claimed by experts in the field that there are now more psychopathic CEOs than there have ever been. It is hard to avoid thinking that neoliberal policies in governments and corporations is the cause of the emergence of this personality trait in people with power.

      1. larry

        I left out Groupthink, a social psychological mechanism that “forces” people in a group to react in similar ways, whether empirically validated by reality or not. This does not exclude that the source of the Groupthink is a psychopath, or group of psychopaths acting in concert.

  3. THe Beeman

    Should the middle managers as well as the rank and file employees be held accountable ?

    Didn’t they violate banking laws as well as Stumpf and Tolstedt?

    I consult in Asset Management Technology and if I was caught pulling any kind of fraud even at the behest of my managers, I would never be allowed to work in the industry again. I’m fingerprinted and background checked for every client.

    1. Yves Smith Post author

      Stumpf says the bank fired managers including regional presidents, but the Senators said it was mainly low-level employees who got the axe. And the media reports that people who didn’t meet sales targets were fired, so I wonder how many of the people that Stumpf says were fired for abuses were actually fired for not selling enough.

      But putting that aside, let’s consider an analogous case I’ve mentioned a few times.

      Chase advertised a fee free business account. I wanted to get a second account to deal with PayPal (I so don’t trust PayPal that I did not want them to have the info from my main account).

      I go to the branch knowing full well that fee free isn’t really. The staff tells me I can do any one of three things to keep from being charged a monthly fee.

      I come back 2 more times and have different staff people tell me how the account works to make sure I understand the three options. One time, I got the story from the branch manager. Each time, I played back to them my understanding of what I had to do to avoid a fee and they confirmed it.

      I am very confident I will do one of the three things all the time so I get the account.

      Within four months, I am being hit with a monthly fee. I call customer service to complain. They insist that the action I had been told would keep me from being charged a fee would not in fact keep me from being charged a fee.

      I go back into the branch, meet with the manager (same guy I met before), give him a recap, and ask why I am being charged fees.

      He says my agreement allowed them to charge the fees.

      In other words, the branch staff all were trained to lie about the terms on this account. It was systematic, institutionalized, and clearly not designed at their level (retail branches are run like stores and procedures are highly standardized).

      In a case like this, who would you deem to be culpable? If any of the people I met people deviated from the dishonest sales process, they would be fired.

        1. Yves Smith Post author

          The smart phone would not make an iota of difference. I guarantee the fine print of the agreement had standard contract language, which is that the written agreement is the entire agreement and supercedes anything prior understanding. That means what the bank reps said counts for nothing legally. That’s why they can be so brazen about this sort of thing. They rely on human nature, that people believe someone in a well-known, reputable seeming business would never lie to them deliberately and repeatedly, particularly as a matter of corporate policy.

          1. Tim

            Well, when we all start treating our friendly banker at the local branch like a car salesman and car dealership respectively we’ll all be better off.

            I need to revisit my free checking and savings account with Chase…

      1. The Beeman

        Thank you for your thoughtful reply, Yves. You raise a point I hadn’t considered.

        In the case you describe, isn’t the bank itself engaging in a fraud – by design, bank employee verbal explanations are not in agreement with account opening documents – unless of course the documents themselves were designed to be misleading.

        Doesn’t anybody read anything anymore?

        As far as the WF case, I thought I read that bank employees were initiating account opening processes on their own authority without consent from the client.

        1. Yves Smith Post author

          The standard credit card agreement circa 1980 was one page. As Warren pointed out a while ago they were then 36 pages of itty bitty print, with all the attachments. Alan Greenspan said he couldn’t understand them.

          My father was interested in getting a home equity line of credit so he could build a retirement home before selling the one he lived in. He wanted to see the contract before closing. The bank did not want to give it to him. It said no one ever asked to read them in advance. He had to get very insistent to see it.

          He decided not to go forward because the language was so one sided in favor of the bank.

      2. Paid Minion

        You must have bought into the propaganda that US businesses are there to provide products and services.

        Silly you…… :)

        The new paradigm is conning the dolts into signing a contract, then nickel and diming them to death with the fine print,

        My last cellphone contract had more paperwork than my first home mortgage…………all of it designed to keep my checks coming, no matter how crappy the service.

      3. lyman alpha blob

        RE: training employees to lie

        On a somewhat related note, when I worked at WAMU they updated their fee structure with the result being that customers would be charged way more in bounced check fees. Same old scam – post the biggest check first and then all the smaller ones rather than the reverse and generate several overdraft fees rather than just one. We were directed by upper management however to tell customers some version of ‘It’s for your own good’ if they were to ask about the new excess of fees.

        I had a customer come in who was hit with these fees and when they asked how it could happen I told them the truth – that the bank had changed its fee structure in order to take more from customer accounts. My manager who was actually a pretty good egg took me aside and told me I wasn’t supposed to say that. I asked her if it were the truth and when she agreed it was my response was that I wasn’t paid to lie for the bank. Since she did possess some ethics herself I wasn’t summarily dismissed. I personally made a habit of refunding pretty much any bank fee any customer asked me to as IMO most were not warranted.

        As I and others have noted previously, this bogus cross selling practice isn’t just limited to Wells Fargo and neither is the practice I described above. I’m sure there are plenty of other scams these charlatans are running too. Too bad there isn’t much political will to do anything about it except grandstand.

      4. JTMcPhee

        I guess anyone can get hoist by the stuff that’s printed in 2 point type, even the smartest and most cynical and world-wise…

        I was a lawyer and have my owns failures to read every word, in context and with attention to cross-references and definitions, to remember, and was involved in drafting sh!t that went into the 2 point paragraphs…

        If all are guilty, none are guilty? I guess that is how the reality bites?

        1. The Beeman

          Here’s an idea – when opening an account, every type of financial institutions prepares account opening legal docs. They ask you to sign – you ask the bank employee to highlight applicable fee structure for your kind of account and work through by hand with you in writing the fees attributable to your scenarios.

          I learned this a long time ago. Catches all kinds of scams, misinterpretations and misunderstandings.

  4. Skippy

    All I want to know is what happened to Stumpf’s right hand….

    Disheveled Marsupial…. industrial accident or anxiety removal gone horribly wrong…

  5. Jim Haygood

    ‘The correct answer isn’t hard: tell the credit agencies for each and every one of the over 500,000 credit cards that the credit reports should never have been pulled on them and that any late charges were the bank’s fault.’

    If you’ve ever dealt with the Gang of Three credit bureau cartel, then you know that they make the IRS look responsive, transparent, and customer friendly by comparison.

    Their fundamental design is to treat creditor input as indisputable truth, disregard all attempts by consumers to correct factual errors, then run their GIGO data through an opaque algorithm.

    The Gang of Three operates this way thanks to federal legislation such as FCRA and FACTA, which some of those Senators likely helped pass. Among other things, federal law prevents aggrieved consumers from taking credit bureaus to small claims court, where they would drown in litigation with all their polluted, erroneous data.

    Sad fact is that attempting to repair the credit damage caused by WFC with new input data likely would produce its own double-digit error rate. Undisclosed time weighting factors in the credit bureaus’ algorithms mean that correcting bad input from prior years won’t necessarily restore the status quo ante.

    Smash the Gang of Three, and the Senators who enable them.

    1. Skippy

      Citizens United says emphatically…. NO…

      Disheveled Marsupial…. if you don’t treat the disease you’ll just keep getting the same infections over and over again and they will evolve…. until their is no treatment…. they will – own – the body….

    2. Yves Smith Post author

      It’s even worse than you think.

      In 2002, Citibank said I was delinquent on an account I had closed. Delinquent is super bad.

      I managed to get a guy to take my problem seriously. I wish I could remember his name because he was incredibly diligent, and this was for an ex-customer of his business.

      He sent letters on Citibank letterhead to the credit agencies pretty close to monthly for IIRC over eight months. It took forever for them to correct the files, even with Citibank saying very clearly they’d made a mistake.

      I believe in the wake of the crisis they’ve been required by law to be a bit more responsive, but per your point, they are starting from such a horribly low baseline that I’m sure dealing with them is still about as pleasant as having a root canal.

      1. Jim Haygood

        Likewise, Bank of America said I was delinquent on a balance which I had disputed in a series of four letters, none of which was ever acknowledged or answered. (Banksters prefer to handle matters on the phone, where they control the recorded record, which goes missing if unfavorable to them.)

        Even getting the credit bureau to add an ineffectual customer comment, “balance is in dispute,” proved to be impossible. After three go-rounds, I gave up.

        Pepe Escobar’s quote from Cathy O’Neill (in today’s links) is apposite to the Gang of Three:

        “These mathematical models [are] opaque, their workings invisible to all but the highest priests in their domain: mathematicians and computer scientists. Their verdicts, even when wrong or harmful, [are] beyond dispute or appeal. And they tend to punish the poor and the oppressed in our society, while making the rich richer.”

        In the Wells Fargo case, it’s doubtful that credit bureau technology is sophisticated enough to simply repair the damage. Their clanking Big Data algorithms likely aren’t designed for such fine tuning, since they are almost legally immune to externally mandated corrections.

        1. Clive

          That is a very valid point Jim. Credit scoring corrections need detailed information about what parameters are incorrect. It’s not enough to simply post a reversal of adverse data as at (say) today’s date. You need to trace back what data items were sent and when, then run a full recalculation.

          For example, if a fake account was opened and incurred a late fee two years ago, then was flagged up and went into arrears a year ago where it languished in Collections and Recoveries for that time as Wells attempted to recover the outstanding amount but couldn’t as there was no “tappable” sources of funds available such as another account with a credit balance to siphon off, then was finally subject to a charge off as seriously delinquent last month, that would generate one permutation of FICO impairment.

          If instead a fake account was opened and incurred a late fee two years ago, then was flagged up and went into arrears a year ago but was cured as Wells found they could pinch some monies from another account a little less than a year ago, the customer noticed and demanded a reversal (which was actioned by Wells), after which they got fed up of Wells’ thievery and closed out their in-credit account, the remaining fake account (which they didn’t know about and couldn’t cancel) bounced back into Collections but this time there was nowhere to pilfer to get the fee paid from and was then charged off as seriously delinquent last month, that would generate another, entirely different (and potentially better, although still bad) FICO drubbing.

          Same final outcome but a totally different route to getting there and a different FICO impact.

          And yes, I would never ever deal with any financial matter of any importance with a bank over the phone and the only method of resolving a problem above the trivial level is to put your request / demand in writing, then send it certified delivery (with full tracking so you can see it was signed for, where, when and by whom). Send no more than one chaser if you don’t get a response (again, certified mail). If you still don’t get a reply or progress, invoke the disputes procedure immediately. While you may well find yourself subject to mandatory binding arbitration or mandatory alternate dispute resolution, this is still more robust and less easy to tamper with (e.g. via bank staff who suddenly get bad cases of amnesia or, as Jim mentioned have recordings of calls get “lost”) than trying to get something fixed in the branch or over the phone.

          1. hemeantwell

            The Consumer Law and Policy Blog has more on the contribution of enforced arbitration to extending the crime spree.

            Tuesday, September 20, 2016

            Did Arbitration Clauses Help Wells Fargo Get Away With Account Opening Frauds for Years?

            That’s a point made in an op-ed in The Hill, Why Wells Fargo Got Away with It So Long by Public Citizen’s Robert Weissman and AFR’s Lisa Donner. The whole piece is worth reading, but here’s an excerpt:

            [M]ore than three years ago, a Wells Fargo customer named David Douglas sued in California, contending that the bank’s employees and branch managers “routinely use the account information, date of birth, and Social Security and taxpayer identification numbers … and existing bank customers’ money to open additional accounts.” Douglas alleged that branch managers opened at least eight accounts in his name and created fake business accounts under his name without his knowledge.

            This case should have gone to court but was blocked by a ripoff clause. Douglas’s lawyers argued that an arbitration provision in a legitimate account agreement should not bar him from suing over a sham account he never agreed to open. However, citing recent 5-4 U.S. Supreme Court decisions, the judge held that the ripoff clause in the original agreement blocked him from suing Wells Fargo.

            In 2015, another Wells Fargo customer, Shahriar Jabbari, tried to file a class action against the bank, claiming that employees hid fees, refused to close accounts on request, and forged signatures and addresses. Wells Fargo publicly denied these allegations. Again, the judge ruled that the ripoff clause in the original account agreement forced any unresolved disagreement into arbitration, and Jabbari’s class action was kicked out of court.

      2. Robert NYC

        root canals aren’t that bad, had one earlier this year and I would take several of them over dealing with a credit agency.

  6. Benedict@Large

    $200 million in canteen money? He’ll be the most popular guy on the cell block. Now, if we could only find a prosecutor.

  7. visitor

    Why didn’t Mr. Stumpf oppose a barrage of 5th amendment invocations like Shkreli did? Did he think he was more clever?

    1. Yves Smith Post author

      He doesn’t think he or the bank did anything all that bad. That was the big reason the Senators were so upset. They were doing the verbal equivalent of grabbing him by his lapels and shaking him.

      But that raises a point I neglected to mention. Senator Shelby made Stumpf testify under oath, which is unusual. I give him a lot of credit for that.

      1. visitor

        The fact that he had — unusually — to testify under oath makes things even more baffling.

        What kind of legal counsel would not have figured out the potential judicial risks of what took place at WF and mahouted Stumpf to avoid the pitfalls of a senate hearing?

        1. NotTimothyGeithner

          Eric Holder was AG for almost seven years. Why would a bank exec worry? Oh you know the Senators have to make a production for the election. It’s not like Stumpf is going to get an invite for “Dancing with the Stars” (Tom Delay, Ryan Lochte. ..maybe he will) or write a best selling book on business at this point.

          As Northeaster notes, Podesta is a Wells Fargo lobbyist. At worst (Trump winning is inconceivable to a bubble class in this country), he has to run out the clock. Hillary is already unpopular. She might as well pardon bankers.

        2. Yves Smith Post author

          Super duper bad for a bank exec to turn down a hearing like this. The press would be in a huge uproar.

          And remember, per above, Stumpf really believes that the fraud, to invoke Bernanke’s pet word, was contained and hence not that big a deal.

      2. Valuationguy

        As far as your noticing that the Committee put him under oath…..as I stated in the first of your articles…..the rules for Wells are going to be different than for the other money center banks….as Wells political connections are generally lacking. No wonder he waffled…

        I agree with your guess that Stumpf wouldn’t disparage Tolstedt due to clauses in her separation agreement….but I think there is probably more to it than just that. Tolstedt couldn’t have gotten the payoff she did or the no disparagement clauses without A LOT of leverage on the senior management team and Board.

        I expect a much bigger (and fruitful….for those who have been frustrated by the incompetence of gov’t investigators or prosecutors….) OUTSIDE investigation in this than even the London Whale episode.

        1. Yves Smith Post author

          No, no, no, this was not a payoff. She had years of deferred comp and other exec options goodies. She’d been with the bank 27 years. Hate to tell you, this is normal well-performing-at-a-really-big- institution executive largesse. She left with what she had “earned”. No extra payoff, save what happens to the 2016 bonus. What had the Senators ripshit was that none of that was dinged.

          1. Valuationguy

            Not trying to say that her existing contract didn’t entitle her to those payments normally (i.e. absent dismissal for cause). I’m saying that Wells agreed not dismiss her for cause in return for her ‘voluntary’ departure. Her departure was ‘voluntary’ only in the sense of neither party (including the regulator who is up to their eyeballs in this mess as they were directly negotiating with Wells’ lawyers not to prosecute the bank) wanted to create a BIGGER mess….which still happened despite their best efforts to keep a lid on it..

            Quid pro quo is very much alive.

            1. Yves Smith Post author

              People at that level are NEVER fired for cause. Never. I can’t think of a single instance. They all are forced to resign. The big reason is that in cases like hers, they have years of glowing personnel reviews. It’s way too dangerous to fire for cause when someone senior has reviews that basically prove the bank has approved of crooked behavior. The employee could legitimately sue for wrongful termination and embarrass the hell out of the bank in discovery. And Tolstedt has earned millions in comp, so she could easily pay for the best lawyers if it were to come to a pigfight.

              You are posting norms that don’t exist. She’d have to syphoned money from the bank into personal accounts for something like that even to be considered.

      3. Robert NYC

        Could be that Stumpf is a sociopath. They are quite common at the highest ranks in any corporation. Simply incapable of accepting responsibility or showing any remorse.

    2. Thorstein's Ghost

      If Stumpf had invoked the 5th amendment, that might have led to an “adverse inference” against him in civil litigation, including a bank regulatory action.

  8. Bottom Gun

    Someone ought to look at the Racketeer Influenced and Corrupt Organizations Act. Predicate offenses include 18 U.S. Code § 1028 – Fraud and related activity in connection with identification documents, authentication features, and information and 18 U.S. Code § 1343 – Fraud by wire, radio, or television, which other readers have identified as possible charges. The trigger is two acts within ten years. I think we meet that, what, 250,000 times over?

    RICO. It’s not just Sonny Crockett’s partner in Miami.

    1. diptherio

      See, you’re assuming that the PTB actually want to prosecute these criminals…however, that does not appear to be the case.

      1. Bottom Gun

        As a former federal financial regulatory official, I can assure you that I assume no such thing. Just pointing out facts. Someone else on this board said we have a legal system, not a justice system. But I am not so certain we even have a legal system.

    2. Yves Smith Post author

      My understanding is RICO is seldom used because in practice, because the statutory standard is high and more conventional theories of action are much easier to satisfy. The main benefit of using RICO seems the ability to seize property first and ask questions later.

  9. Northeaster

    Stumpf isn’t going to leave on his own, he would leave $25 million on the table according to Wells Proxy.

    The sad and comedic irony of all this is Hillary Clinton’s letter in regards to the Wells Fargo fraud. Why?Because Clinton’s campaign Chair, John Podesta, is also Wells Fargo numero uno lobbyist! LMAO!

      1. JTMcPhee

        That’s what got the other Bernie, the Madoff one — you don’t steal from the mother truckers who own everything…

  10. John

    “the toughest interrogation came from Sherrod Brown”

    I don’t know what hearing you were watching.

    Brown was PATHETIC. Keep apologizing to Stumpf and couldn’t manage
    to make a single point.

    As ranking member of the committee he should take it upon himself to resign. USELESS.

    1. TedWa

      He used to be good, but now he’s a shill for HRC – even promoting to a small degree, the TPP since he knows HRC is secretly for it. .

  11. Robert NYC

    Unfortuanltey lots of theatre in Washington yesterday, but it’s unlikely there will be any consequences; not in this banana republic. The oligarchs are still firmly in control and while they may have to deal with some occasional public outrage, this too shall pass without any real consequences. Not sure who heads the criminal division at the DoJ right now but you can be sure he or she came from one of the law firms that represents the grifter class and is there to run cover.

    1. john

      Stumps was no doubt was consoled and apologized to afterward by the same Washington chumps
      over cognac at a restaurant none of us could ever get a reservation in if we waited years.

  12. diptherio

    He’s clearly more attached to keeping his gains than keeping his job. But what was revealing was his refusal to entertain them even for the conveniently recently retired Carrie Tolstedt, who is leaving with an exit package of an estimated $125 million in cash and equity prizes. Note that the financial press has reported that $17 million could be clawed back under the bank’s rules

    Isn’t this the real problem? Yves says Stumpf is unlikely to face jail time, even if prosecuted (which, honestly, I won’t believe until I see) so it seems like we have a situation where even if the leadership gets caught red-handed, the worst they have to worry about is having to return some small percentage of their ridiculous pay. Carrie might only end up with $108 million instead of $125 million…excuse me if I am not impressed or excited by this possibility.

    Oh, and has anybody (with enforcement authority) ever followed up on the revelations of the In re Jones case? Mis-allocation of mortgage payments is baked into their accounting software, by their own admission, and I have heard zippy-zip about anyone looking into it.

    If the best our fearless leaders (HA!) can do is meaningless fines and some harsh language, they are complicit in these crimes as well. Insufficient sanction of criminal acts (over and over and over again) is aiding and abetting criminality, in my book. A tongue-lashing is fun to watch, but if that’s as far as it gets, you will all be held responsible (by this citizen, least-ways)

    1. Yves Smith Post author

      I didn’t say Stumpf would be prosecuted. I said he would be investigated, which is a pretty safe call since the DoJ is investigating now. Only way he gets prosecuted is if Tolstedt is indicted or threatened with indictment and is able to turn in sufficiently good evidence on Stumpf to let him be indicted as part of her plea deal.

  13. flora

    Thanks for this post. Without criminal prosecution Stumpf will be… what’s the phrase… laughing all the way to the bank.
    Hope you’re correct about some of the questions asked.

  14. TruNorth

    I’m not impressed with the theater, Liz Warren is convincing and performs well as designated, token attack dog, with no teeth.

    1. Pavel

      More or less my reaction. It was a great, articulate rant by EW, but rendered pretty useless in my eyes by her decision to endorse HRC, who is the best friend of these very banksters Warren is attacking.

      BTW what happened to those Hillary speech transcripts?

      1. Procopius

        Transcripts? We don’t need no steenkin’ transcripts! Come on, do you really believe HRC said something that will come back and bite her in those speeches? Those speeches were just excuses to give her money. Nobody who was in the audience was there willingly. They were told to go or be fired. She probably read a couple pages of the Manhatten telephone directory, or maybe read a chapter of My Favorite Goat. Whatever she said would have had no substance. Besides, if anything noteworthy had been said, somebody would have reported the fact by now. The people who were forced to sit through that painful experience wouldn’t be Hillary fans. They would have leaked the story to some tabloid, at least.

    2. NotTimothyGeithner

      At this point, the issue is the CFPB and potentially the relevant criminal investigation outfits. Of course, Stumpf should be prosecuted. A coma patient could articulate that. Sanders lone question is the one that matters. Did the CFPB turn this case over to law enforcement?

      If yes, it’s time to put Loretta Lynch on the stand and subpoena her. If no, it’s time to subpoena everything about the CFPB. Stumpf can wait for justice. Hes a side show. Finding underlings to flip should be easy enough. Now, you do want Lynch and friends on the stand because lying to Congress is easy to prosecute.

      1. JTMcPhee

        …and who is going to protect the mopes by “issuing subpoenas?” And enforcing even that weak tea against a blizzard of buullllsheeet and non-responsive paperwork and private luncheon meetings from the silk-stocking lawyer LLCs?

        The Bezzle is omni… So much easier to go along and get along. A terminal disease, where the tumors and parasites “win”.

        And people are all “We don’t understand the resilience and appeal of ISIS…” http://nymag.com/scienceofus/2014/08/how-isis-seduces-new-recruits.html And lots of other studies that indicate what a “next phase” might be.. Maybe the commies had something right, about the capitalists destroying themselves from within. Of course, the Fokkers who are running things will do just fine, free from consequences in their lifetimes. Which they will live out to their full span, in grotesque luxury, with a sneer and a big ” Kiss my a$$.”

  15. TedWa

    This is how the TBTF banks controlled appraisers and home valuations pre-2008 that caused the bubble. Wells Fargo’s Stumpf was 1 of the chief architects by saying that all appraisals are the same no matter who completes them, and the appraisers should be paid on a factory level basis for “manufacturing” appraisals and valuations. This led to the TBTF’s to seek out and newly minted appraisers that wouldn’t be hired under any other belief system with the benefits of low pay for the appraisers and a captured section of the appraisal profession afraid that if they didn’t make the values needed by Wells and cohorts, they wouldn’t be working. Cuomo perfected this line of thinking with the HVCC and taking away appraiser independence – ensuring the banks could continue to work this way any time they wanted.
    As we all know, the TBTF’s are systemically rotten within and without. I’ve read recent reports that bank tellers need food stamps to continue working at some of these TBTF’s, much like the workers at Walmart. So yeah, of course they did it. The government and Obama should have at least gotten rid of the CEO’s behind the meltdown. Well, at least 1 is getting caught for fraud and their sneaky deeds are being exposed. Cumbaya

    1. JTMcPhee

      A good friend was an appraiser, lived through that, got cut off for adherence to honesty and standards, and is now a practitioner of Chinese medicine.

  16. hreik

    There are 2 different universes. We live in one, they live in another. That’s why EW cannot wrap her head around this (like the rest of us) and Stumpf cannot manage to understand her. This is sociopathy full stop.

    “I disagree that this is a massive fraud”. That what I just heard. He’s a sociopath. He has no moral center, or rather it is a wholly corrupted moral center.

    They were talking past each other. This is the world we live in. Where the rich and famous and rich and crooked rule.

      1. hreik

        Irrelevant to my point. Her acting job was just fine… The theatre is is fine. Her points are still correct whether she herself believes them or not.

        There are 2 universes. Theirs and ours. Theirs requires sociopathy.

        1. JTMcPhee

          And which part of the Venn diagram contains all the wealth and power?

          “Who’s the crazy ones here, again?”

  17. TedWa

    Stumpf was the leader pre-2008 in stating that all home appraisals are the same and appraisers should be paid at a factory level for “manufacturing” valuations (so the banks could pocket more of the appraisers fees). This led all the TBTF’s to find newly minted appraisers that they could completely control with the threat of not getting any more work, and with that the valuations they made, to insure that loan values were always met. This belief has been enshrined by Cuomo’s HVCC. Nice to see this ….pathic individual finally getting caught at something. Like Walmart workers, many workers at banks need food stamps to supplement their income so of course they’re going to take the bait this CEO’s greed created.

  18. jfleni

    If possible, RUN do not walk to your nearest Credit Union and close all
    bank (read “Bunco”) accounts soonest! Banks have now shown themselves to be swindlers and thieves, no question. Hit em where it hurts!

  19. Peter VE

    This reminds me of David Frye’s Nixon saying: ” I take responsibility, but not the blame. Let me explain the difference: people who are to blame lose their jobs.”

  20. RUKidding

    Yesterday some of the more lefty blogs were crowing about EW’s “hatchet job” on Stumpf and how glorious it all was. The best!

    I just thought: yeah, yeah. Good Kabuki Show.


    Stumpf’ll weasel out somehow. May get some money – that he doesn’t actually have now anyway – taken away. That’ll be it. IOW, if we’re really lucky, he’ll get a tap on the wrist.

    Does this mean that Wells Fargo starts behaving better? Doubtful.

    No truth. No consequences. Screw the proles.

    1. Paid Minion

      Yeah, he might be forced to retire with 50 million bucks, instead of 150 million.

      Boo freaking hoo, what a hardship.

      Of couse, my thinking is shaded by the fact that these a-holes have stolen so much money, that many of us will be spending much of our retirement living in a cardboard box beneath an Interstate overpass, assuming we can afford to retire at all.

      1. Yves Smith Post author

        No, he’s worth much more than that.

        $200 million is the gain in the value of the Wells Fargo stock he owned during the period of the fraud. Warren took the number of shares he owned and multiplied it by the appreciation from 2010 to 2015, if I heard her correctly. So that does not include his annual pay, any deferred comp, or any stock options he has yet to exercise.

    2. readerOfTeaLeaves

      Stumpf’ll weasel out somehow.

      I understand your frustration, but suppose that you managed a pension fund that had WF stock? Suppose that you were invested in WF? Do you honestly think that all these investors are only going to roll their eyes and forget this outrage? Are they going to ignore the basic fact that fraud is a non-starter as a business model over the longer term?
      Not a snowball’s chance in hell.

      Would you want to have to tell your law enforcement and teacher retirees that their life savings are invested with a pack of fraudsters, who use corporateSpeak to try and weasel before a Senate committee? That’s simply not in the cards.

      I have relatives who serve on the boards of smaller, community banks. No way in hell they aren’t working through their local Chambers of Commerce, to say nothing of calling their Senators. No way Wells Fargo gets off without consequences on this one.

      Stumpf is a dead man walking.

      1. Yves Smith Post author

        Yes, several of the Senators were outraged on behalf of banks in their jurisdiction. This is a very big deal with Shelby, who despite being a Republican, has long been a defender of regulations (up to a point) and the need for sound traditional banking (he really hates Wall Street and mega banks).

  21. ExtraT

    A personal experience with WF:
    In 2008 I had a construction loan with them. The plan was to build a small family home just outside town. In the middle of the construction, the WF manager requested $10k back in order to continue paying the workers building the home. This happened to be exactly the money we had in our Credit Union account. They took the 10k and a week later they told us that we had exactly 10 business days to return some 90k we have already spent for construction by that time.
    We were lucky that a small local bank stepped in and lent us the money, but we lost something like 40k in fees. I wonder how many people were less fortunate than us. How many families were emotionally and financially destroyed ?

  22. readerOfTeaLeaves

    After learning of blatant, widespread fraud (on thousands of customers?!!) by Wells Fargo, and then layering on Stumpf’s corporateWeaseling, it’s hard to see how even the most craven Wall Street suck-ups can avoid bank reform.

    This single video is a solid argument for Post Office Banking, if only because civil servants would have no reason whatsoever to ‘cross sell’, would not have to sell at all, and would be far more economically efficient than the cost of even two WF exec salaries:
    $125,000,000 of Tolstadt’s ‘salary and comp’
    $200,000,000 of Stumpf’s ‘stock’ referenced by Sen Warren

    So for what WF paid only two execs, the nation would save $325,000,000 in outrageous economic parasitism.

  23. HotFlash

    After learning of blatant, widespread fraud (on thousands of customers?!!) by Wells Fargo, and then layering on Stumpf’s corporateWeaseling, it’s hard to see how even the most craven Wall Street suck-ups can avoid bank reform.

    What I can’t figure out is how do they still have any customers?

  24. Randall Stephens

    I heard a portion of the hearing (sorry about that) on an NPR broadcast this afternoon. Loosely I recall that Brown was pointing to Wells 39 prior violations.

    Isn’t it time we drafted a “three strikes” law for corporations?

  25. John Medcalf

    What did we expect? – Like Moody’s, Wells is a Warren Buffet Champion Performer.
    Face it folks – corruption is the norm.
    My artist friend provided me a picture of Warren the Oracle vomiting over the adoring legions. Priceless. No one ever said the truth doesn’t stink.

    1. readerOfTeaLeaves

      I don’t castigate, nor blame, Warren Buffet. He’s a maven for business data. He did not implement the cross-selling at WF and has always struck me as a person who cares very much about responsible business practices.

      I’d blame Greenspan and his moronic 1990s views about ‘irrational exuberance’ before I’d ever blame Warren Buffet. Greenspan opened the original floodgates at the Fed that drove financialization; he is far more culpable than Warren Buffet will ever be. Buffet, OTOH, actually has skin in the game, which is more than anyone could say of Greenspan.

      Barry Ritholtz has given a brilliant explication of how envy of Silicon Valley / tech capacity to create new wealth back in the 1980s and 1990s gave Wall Street a very, very bad case of ‘dot com pen!s envy’. I am convinced that Ritholtz’s explanation also applies to this problem at WF and all the other TBTF banks who mystify and worship the creation of money.

      Yves has explained how this same intellectual conceit probably lies at the heart of Wells Fargo’s rampant fraud in her recent post; allow me to copy a relevant passage:

      They seemed to believe that boring old banking could become the next Apple….without any iPhone, that the mere force of corporate will could get the American public to buy more Wells banking services, in the absence of any evidence of customer appetite or Wells having better financial mousetraps.

  26. steve brassey

    wash, rinse, and repeat. read a great book about the roaring ’90’s and how the big ny insurance cos. hosed off the public. a few top dogs went to prison and returned to their old posts without much of a whimper; this was when the nyse was a nascent apple stand; fast forward to the Nuremburg trials and the convictions of some Nazis; they did less than the sentences doled out and by 1950 were back at the helms of their old German/American exploiters of the second world war. Wall Street owns the country, unlike the Enron, Worldcrossing or Global Crossing or whatever, and so they will not go down until someone goes postal and puts the fear of God into the thieves and parasites. it is Rome all over again, with politicians and ballplayers making outrageous $, and I am or was, a lifelong sports fan, who played everything into college. What a laugh it has become, with 5 guys on a panel on a meaningless MNGame?
    And radio sports porn, where they project the playoff teams, after 2 weeks? A very sorry joke, and the best one of all is all the fantasy horseshit, which we all dreamed up in san leandro and alameda back in the 60’s; should have patented the concept, but, oh well. take care all, I think Armstrong may be right.

  27. crittermom

    Hundreds of thousands affected?
    Clawbacks? Prosecutions?
    *heavy sigh*
    I’m not holding my breath. From past experience, I’m not even getting my hopes up.

    Gee, maybe they’ll come down hard on ’em like they did for the over 8 MILLION of us left homeless, despite the overwhelming proof of empty REMIC trusts, Robo-signing, inflated appraisals, destroyed deeds and notes, MERS, etc, etc, etc.
    Oh, wait…
    (Am I wrong to think the IRS should’ve stepped in regarding the empty REMIC Trusts? They’re the agency that brought down Capone, right? My very limited financial knowledge still thinks the banks owe billions of dollars in taxes for their lack of depositing into the Trust within the specified 90 days–and most often, never).

    We all know that What-the-Fargo Bank wasn’t the only one doing such nasty deeds as exposed currently.

    My SINCEREST hope is that all the other banks doing the same thing are as widely exposed SOON, thereby affecting the majority of the citizens and getting ’em MAD. Hopefully before the election?

    Maybe then those in power will finally come to realize that 99 is a much larger number than 1, and actually begin listening to us and prosecuting.

    Then again, I’m all for prosecuting Eric Holder for ‘crimes against the American people while in a position of power with the govt’, for the way he helped the banks keep their illegal profits and avoid prosecution.
    Call me a dreamer…

  28. It's about time

    “5,300 bad apples”. I don’t think so.

    Large banks hire lots of tellers and personal bankers. To make the process efficient and to better control the result they engage selection companies using predictive analytics to screen applicants. The process includes the bank providing the selection company with their star performers attributes they want to screen for. The process could include interviews with star performers from the bank. The PhD’s at the selection company design a series of questions that allow the selection company to sort applicants based on attributes best suited for tellers, personal bankers, etc. In this way you filter out a large number of applicants and focus on the applicants best matching the bank’s criteria for the position(s) on offer. I don’t know what Wells Fargo does currently, but for many years they took a systematic approach just like this to hiring.

    The process of applying predictive analytics to hiring isn’t perfect. You don’t get clones, but you get a high proportion of people that possess the attributes you selected for. To say these were “bad apples” may be true, but it seems highly unlikely. Maybe they were actually selecting for bad apples.

  29. Sound of the Suburbs

    With Trump or Clinton as the leader of the free world, god help us all.

    Endemic corruption has propelled these two candidates forward, which most of the voters in the US aren’t happy with.

    They have the essential credentials to lead the US, an Ivy League University education.

    They are as keen on social mobility in the US as we are in the UK as the OECD figures demonstrate.

    When the political, business and financial elite are drawn from the same small pool, crony capitalism and endemic corruption are almost inevitable.

    Oh banker buddy of mine, that I have known personally for years, we are part of the elite and born to rule, of course we can waive your little misdemeanour.

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