Almost Nobody Is Satisfied With Wells Fargo CEO John Stumpf’s Overdue Departure

As was widely anticipated, Wells Fargo Chairman and CEO John Stumpf resigned yesterday. The bank presented the departure as voluntary, and if so, that speaks volumes about the complacency of the board in the face of an ongoing scandal that has already taken 20% off the market capitalization of the San Francisco bank. The forcing event appears to have been that Wells’ quarterly investor conference call is scheduled for Friday. Having a new CEO sell the story that Wells was putting the scandal behind it would clearly be more credible than having Stumpf peddle that pitch. Mr. Market seemed to agree, since Wells’ shares traded up 2% when the S&P 500 was virtually flat.

However, the bank hasn’t taken moves consistent with housecleaning. One of the big themes of the Congressional hearings, particularly the House Financial Services Committee session, was that Wells has a diseased culture. We presented plenty of evidence not just of Wells foreclosure abuses, but also of a peculiar combination of institutionalized bad practices with a bizarre smugness, an unwarranted belief that it was morally superior. In keeping, when Stumpf was hit again and again with the evidence of corporate procedures that would require many employees to cheat to keep their jobs, Stumpf appeared to genuinely believe that his bank had integrity, that any problems, as Ben Bernanke would have put it, were contained.

As expected, Wells elevated an insider, Timothy Sloan, to the role of CEO. It also split the role of chairman and CEO, a long-overdue good governance basic that TBTF banks in America have resisted. However, a current board member, lead director Stephen Sanger, who comes from corporate America, and not the financial services industry, will become chairman. It would have been a more convincing move to have a respected outsider such as Shiela Bair take that role. Of the ten biggest banks, Citigroup is the only other to have a non-executive chairman. It’s likely that change was forced on Citi by Bair as the head of the FDIC, who also got the bank to downsize in a major way. Stumpf’s blindness to the disease of an overly-zealous sales culture suggests that the board and Sloan will be in denial about the magnitude of change required. House Financial Services Committee ranking member Maxine Waters has the same doubts. The Financial Times quotes her as saying:

Tim Sloan is also culpable in the recent scandal, serving in a central role in the chain of command that ought to have stopped this misconduct from happening.

Waters is also continuing to press for a breakup of the bank.

Elizabeth Warren isn’t satisfied either. She tweeted:

Stumpf gave up his severance package but the Financial Times estimates his retirement benefits plus direct and family trust Wells holdings as totaling $138 million; a Wall Street Journal expert puts it at $1210 million. However, the Journal noted:

However, the board could decide, depending on the investigation’s outcome, that Mr. Stumpf should relinquish more pay, the person added. This could include as much as $24 million of pension benefits, the person said.

Another Financial Times story argues that Wells Fargo’s tsuris “could cast cloud over peers.” A key point:

Wells’ board had tried to contain some of the damage by requiring Mr Stumpf to forfeit more than $40m of stock already awarded to him, while also taking back about $19m from Carrie Tolstedt, the former head of the retail business. In doing so, it joined a very small band of big companies to have responded to a reputational hit by requiring executives to forfeit unvested shares.

Analysts at Keefe, Bruyette & Woods said the clawbacks should be enough to “quell the outrage”, as they amounted to more than 20 times the fees inappropriately charged to customers during the period that regulators examined. That they were not, may send shivers down the spines of every senior executive at a big US bank.

It’s curious how this misses several points. A big issue was that the bank was far too slow to act to contain the escalating scandal. Second, from the perspective of some of the constituencies that have been harmed, most important whistleblowers who were fired, having Stumpf and Tolstedt merely suffer an inconvenient hit to stratospheric net worths is inadequate. As Elizabeth Warren keeps stressing, if a teller had taken money from the cash drawer, merely putting the money back, apologizing, and having a week of pay docked would never be seen as an adequate remedy. They’d go to jail. The elites are only dimly beginning to recognize that some members of their ranks need to suffer in a big way when they steal from customers or abuse employees. But so far, the members of the club appear unwilling to discipline their own members. If they persist, how long they can hang on to legitimacy and quell populist backlashes remains open to question.

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  1. Larry

    What do we suppose the odds of that clawback are? I would say slim to none, which is why no respected outsiders such as Bair were given a position of authority at the bank. Rather they can elevate a new face, which is the same old face to pretend that the bad practices are behind them.

  2. cnchal

    . . . was that Wells has a diseased culture.

    The MSM is also a diseased culture. I heard David Muir of ABC tell the audience that Wells fired 5000 employees for fraudulently opening accounts. It was never mentioned that they were fired for not opening even more fraudulent accounts and failing to rip off customers in greater volume.

    Bernie Sanders: The business of Wall Street is fraud and greed. He doesn’t say that anymore, but the facts have not changed. Banking is a criminal enterprise.

    The business of the MSM is to provide cover for that criminal enterprise.

    1. sgt_doom

      Can’t stand by Bernie after he’s keeping silent and endorsing HRC, that’s for sure!

      But really, there is no media — this old fart has never learned ANYTHING newsworthy from the likes of Dan Rather, Tom Brokaw, Brian Williams or any of the other newsy floozies!

      But it goes across the spectrum, their phony think tanks and foundations, their phony Pulitzer and Nobel prizes (not really a Nobel Prize for economics, but they continue to call the Swedish Central Bank’s prize that, so let’s look at the recent prize).

      A Finn won in for some arbitrary reason, incentives and contracts, per business as usual.

      Now, what they should have been studying and awarding major prizes for is not all the corruption, but why do very few and select individuals act with honesty and integrity:

      Keysha Cooper, at Washington Mutual, who refused to write up fraudulent mortgage loans;

      Cate Jenkins, at EPA, who sounded the alarm on toxic materials, and has been thoroughly hounded by the Bush and Obama Administrations;

      Thomas Drake, at the NSA, who sounded the alarm on financial abuses (really more intel agency embezzling, to be precise);

      Carmen Segarra, at the Federal Reserve, who was just attempting to do an honest job as a bank examiner;

      John Kiriakou, at the CIA, for sounding off on illegal torture;

      Edward Snowden, at Booz Allen — a contractor to the NSA, who sounded the alarm on their full spectrum surveillance of the US public;

      Amber Lyon, at CNN, who attempted to report the actual news;

      The unnamed Merrill Lynch trader, fired for sounding off about questionable trades;

      Robert Parry, who tried to write the real stories when he was with AP.

      Why aren’t there studies on these real heroes?????

  3. rusti

    As expected, Wells elevated an insider, Timothy Sloan, to the role of CEO.

    David Dayen took note of an interesting quote from Sloan from June:

    American Banker asked Sloan, “Wells has come under scrutiny for its strong sales culture. Is there any sense that the bank has pushed that strategy to the limit?”

    “No,” Sloan replied.

    He said that the company’s vision is to satisfy their customers’ needs and help them succeed. “We know a lot about our customers, and so doesn’t it make sense that we would use our data and match it with our product set to try to broaden our relationship with our customer?”

    While Sloan spoke of appropriately selling to customers and “making sure we follow regulations,” he concluded, “the fundamental strategy that we have is not going to change.”

    Hope Warren takes note of this.

  4. templar555510

    One has to wonder at the pathology of a man like Stumpf, and by extension , other CEOs intent on looting the companies they are employed by . It’s sociopathic by any measure it seems to me . That distancing yourself from your fellow workers, but all the time maintaining the pretence that ‘ we’re all in this together ‘ in every public utterance. If they don’t start out deranged once they get to the top it can’t be long before they get there.

    1. Stephen Gardner

      Actually I think we have to wonder more at the pathology of the system that permits and even encourages it. After all, every society has its sociopaths, what distinguishes ours is that it is an express elevator to the top for the worst among us. People like Stumpf would have robbed banks from the outside but in this system it is much easier and safer from the inside. The only morality necessary is the main rule: make it to the top before your crimes are noticed and you will be untouchable. Once you are in the winners circle you are safe from the law. Only losers like us see it as a problem. They all look out for each other. The only way to be ejected from the big club (see George Carin) is to be disloyal to the other members. That is Trump’s sin in their eyes. It’s a big club and he ain’t in it (anymore ).

      1. sgt_doom

        Or to phrase it another way, perhaps if the majority of Americans are vermin, then it is understandable that the two major candidates for the presidency are also vermin.

        1. Stephen Gardner

          The vermin are mostly at the top. Americans get bad leadership because they are easily propagandized into believing the fairytale economic “science” and class divisive narratives that the owners of our economy have been pushing through think tanks for years. These think tanks were set up to counter the thinking behind the new deal and it worked famously.

  5. Carla

    Yank Wells’ charter and criminally prosecute every member of its management team, including those who have retired going back at least to 2005. Why aren’t more people demanding this?

    We keep saying “Too big to fail is too big to exist.” But Wells Fargo has already failed, damn it.

  6. Harry Cording

    The CEO from Well Fargo, not in the big pen
    Wants eleven dollar bills but you only got ten.
    Look out kid, it’s something you did.

  7. John Wright

    Why have we not loudly heard from the “must maximize shareholder value” people asking for even more from Strumpf?

    Extracting more money would only increase shareholder equity and should boost the stock price.

    W-F certainly does not need to preserve good will with Strumpf as his opportunities to advise W-F in the future seem very remote.

    It would also serve as a lesson to the entire corporate structure at Wells Fargo.

    As it is, this looks like a poker game where Strumpf was caught cheating but then allowed to keep most of his winnings.

    I noticed that the W-F public relations machine damage control has moved down to their ATM’s.

    At my last visit to a W-F ATM I was greeted with a new message screen “Thank you for being a Wells-Fargo customer for thirty three years”.

    Maybe it is time for a change, but W-F is very convenient in Northern California..

    1. diptherio

      Yeah, why not continue to do business with known criminals? It’s super convenient!

      Don’t come looking for sympathy when they screw you over, as they inevitably will. You should (and do) know better. I can’t bring myself to feel sorry for people who know that a game of 3-card monty is fixed but put their cash down on the table anyway.

      1. Procopius

        … his opportunities to advise W-F in the future seem very remote.

        Ah, but not his opportunities to get paid for advising Wells Fargo. Those seem very good indeed.

  8. griffen

    I defer to Yves or Lambert on this point, but when ONeal was shown the door by Merrill in 07 or 08, I am somewhat certain he received whatever his contract stated. Big number that was, if he received it.

    Stumpf is getting a different treatment, and that is a sign, no matter the significance, that times are moving to a better direction.

    Perfect not the enemy of the good & such.

    1. OpenThePodBayDoorsHAL

      Perfect? The last time bankers got caught with their hands this far in the till (the S&L Crisis) we saw prison time for more than 1000 white-collar execs. The number this time? 0.00.

      So we can cheer all we want about “clawbacks” that will only enable the perpetrator to have one Aspen mansion, not two, but until we get perp walks we can just expect more of the same.

      Unfortunately we’re getting Hilary Antoinette, so you can be certain that N-O-T-H-I-N-G will change, the guffaws from law-breaking bank CEOs and government officials can be heard all the way from the Cayman Islands.

    2. griffen

      Just for clarification, per a reference site Stan O’Neal left Merrill in Oct 2007 with his severance intact. That included the 91 million in total comp for 2006.

      Perfect would mean that CEO of an all time debacle at Merrill surrendered his pay and served time. Neither occurred.

      Failure never paid out so well. That said Wells Fargo is in a differentiated class of corporations doing bad things from the above described O’Neal & Merrill.

  9. George H Hartzman

    I received a call yesterday from the following two Department of Labor personnel

    Megan E. Guenther, Counsel for Whistleblower Programs
    Division of Fair Labor Standards [FLS]
    Deputy Solicitor for National Operations
    United States Department of Labor [DOL]

    Mary Ann Howe, CFE
    Assistant Regional Administrator
    Region V Whistleblower Protection Program
    US. Department of Labor, OSHA
    A “top-to-bottom review of cases, complaints, or violations” was ordered by Labor Secretary Thomas Perez in late September, 2016, which will include a review of “the entire docket” of open and closed whistleblower complaints against Wells Fargo since 2010.
    Mary Ann and Megan aren’t really doing a top to bottom review to fix anything already broken.

    They are doing a review to be better in the future.
    On September 27 and 28th, 2016, CNN’s Matt Egan and Kohn, Kohn and Colapinto’s Mary Jane Wilmoth reported;

    “The U.S. Labor Department is reviewing both open and closed whistleblower complaints against Wells Fargo amid allegations that the bank retaliated against employees who called the ethics line. The request for an investigation came as a result of the recent revelation that Wells Fargo employees had created millions of phony accounts…

    OSHA has received “a number of” whistleblower complaints from Wells Fargo employees over the past five years, Labor Secretary Thomas Perez said… Nearly a half-dozen former Wells Fargo employees told CNNMoney exclusively they were fired after trying to put a stop to these practices by calling the ethics line.

    …Senator Warren stated, “I’m glad DOL is initiating a prompt and thorough agency-wide review of all cases, complaints, and violations implicating Wells Fargo over the past several years to determine whether the agency should bring additional claims against the bank. Every other federal agency with jurisdiction in this matter should follow DOL’s lead and promptly determine whether Wells Fargo and its senior executives should be prosecuted or otherwise sanctioned.”
    The “agency” isn’t looking to bring additional claims, per Mary Ann and Megan.

    It sounded good, but the whistleblowers who got shafted are to remain so.

    1. sgt_doom

      Just like we heard “the promise” that 1,000 culpable (guilty) employees at the VA would be fired, and it never happened!

      One always must call bullcrap on a completely corrupt government.

  10. crittermom

    I remain disgusted that no one was prosecuted regarding mortgages, while millions of us lost our homes. It’s been over 5 years for me now.
    I still want to see banksters imprisoned for those dirty deeds. I still live with the consequences of their greed every minute of every day.

    Now this?

    Now I REALLY want to ‘beat any bankster to within an inch of their life’ (if I could even force myself to stop there).

    Oh, but I’m sure things will change once the queen is coronated. *sarc*
    Even if Trump wins (ha, ha), it will get no better. Probably worse.

    How in the hell do we force change, without going through more years of such BS?
    Millions of angry letters from citizens demanding justice? Could that work?

    It hasn’t seemed to in the recent past.

    ‘Politics as usual’ isn’t working for most of us and I’m too damn old to ‘hope’ for change by the slow means of a new figurehead every four years using ‘elections’ orchestrated by oligarchs.
    Especially when our best hope was denied a chance to even ‘compete’ for our votes.

    I’m seething, and ready to dispel some mountain woman whoop-ass on any bankster that is foolish enough to come within striking distance of me.
    (Probably hard to believe, but most of my life–until recent years–I was told I was ‘such a sweet person’).

    So what do we do, other than suffer a ‘slow death’ by means of a crooked election system?
    There must be another answer to get our voices heard and strike fear in those ‘high circles’ that envelop ‘our’ leaders (that are supposed to be representing us, the citizens!)
    I’ll write a letter every day if that’s what it takes to force change.

    Most of us know our ‘election’ system is broken (corrupted).

    I love my country and have no desire to leave it.
    I just want it back.

    1. crittermom

      Oops. I received a phone call so was delayed posting and didn’t proofread well.
      I’d meant to say our JUSTICE system is broken. (well, election system, as well)

      1. sgt_doom

        Nothing “broken” with the injustice system, works exactly the way they set it up, going back to before it was used to railroad socialist candidates who won their elections back in the early 1900s (Palmer Raids, etc.).

        Go sit in on the federal tax court in NYC sometime, and see everyone get off free. Those crooked judges know where their paychecks derive.

  11. KPL

    “But so far, the members of the club appear unwilling to discipline their own members. If they persist, how long they can hang on to legitimacy and quell populist backlashes remains open to question.”

    The members of the club will not realize it till the “Jail them or Burn them” moment arrives. I actually want these guys to continue in this manner and more and more scams get unearthed so that the public will get drawn in more and more numbers and force their representatives to jail them or take matters into their own hands and hang them from the nearest lamp post. This is how you get revolutions. I never thought I will get a revolution in my lifetime (I thought it was for history books) but it looks like we have got a prime seat. Let the movie unfold. I have my popcorn ready.

  12. Jack

    Why no civil suit? This was out and out fraud and theft, not just breaking some SEC regulation. Seems to me a few class actions should happen.

    1. Procopius

      Aren’t the customers bound by the usual arbitration clause buried deep, deep in the depths of their contracts? I would be amazed if W-F failed to take advantage of that loophole.

  13. rd

    The claw backs are great. I am sure that every idiot that robbed a convenience store and dropped a $5 dollar bill on the floor on his way out must have immediately decided that a life of crime just wasn’t going to pay off.

  14. OrangeCat

    Seems that the only way to get at Wells is to vote with your business. Refuse to deal with them period. Starve the beast.

    1. RabidGandhi

      I’m all for consumer boycotts, but it should be noted here that goal of the WF fraud was not to get more customers or sell them more products, but rather to inflate their share price with goosed sales figures. So what really needs to happen to “get at Wells” is for WF and other corps to see that inflating numbers and running up share prices is not profitable. Yet since their model is not customer-based but rather share price-based, boycotting WF would only be good insofar as it hurts their stock value, but it would be an indirect attack nonetheless.

      That said, a mass public boycott would be far more effective than CEO clawbacks or congressional finger waggings.

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