[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
HOLDING WALL STREET ACCOUNTABLE:
INVESTIGATING WELLS FARGO'S
OPENING OF UNAUTHORIZED
CUSTOMER ACCOUNTS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 29, 2016
__________
Printed for the use of the Committee on Financial Services
Serial No. 114-109
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HOLDING WALL STREET ACCOUNTABLE:
INVESTIGATING WELLS FARGO'S
OPENING OF UNAUTHORIZED
CUSTOMER ACCOUNTS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 29, 2016
__________
Printed for the use of the Committee on Financial Services
Serial No. 114-109
HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
SCOTT GARRETT, New Jersey GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico RUBEN HINOJOSA, Texas
BILL POSEY, Florida WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK, STEPHEN F. LYNCH, Massachusetts
Pennsylvania DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin KEITH ELLISON, Minnesota
ROBERT HURT, Virginia ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina BILL FOSTER, Illinois
RANDY HULTGREN, Illinois DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania DENNY HECK, Washington
LUKE MESSER, Indiana JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
C O N T E N T S
----------
Page
Hearing held on:
September 29, 2016........................................... 1
Appendix:
September 29, 2016........................................... 81
WITNESSES
Thursday, September 29, 2016
Stumpf, John G., Chairman and Chief Executive Officer, Wells
Fargo and Company.............................................. 4
APPENDIX
Prepared statements:
Stumpf, John G............................................... 82
Additional Material Submitted for the Record
Foster, Hon. Bill:
Slide entitled, ``Wells Fargo Settlements Since the Financial
Crisis''................................................... 87
Lynch, Hon. Stephen:
Letter to John G. Stumpf from Oversight and Government Reform
Committe Ranking Member Elijah E. Cummings, dated September
13, 2016................................................... 88
Maloney, Hon. Carolyn:
Filing for a court case in Montana which was filed on
September 17, 2010......................................... 92
Filing for a court case in Montana which was filed on October
6, 2009.................................................... 112
SEC Statement of Changes in Beneficial Ownership for stocks.. 126
Moore, Hon. Gwen:
Constituent letter dated September 28, 2016, regarding Wells
Fargo employment........................................... 128
Perlmutter, Hon. Ed:
Wells Fargo Community Banking reports........................ 129
Stumpf, John G.:
Written responses to questions for the record................ 219
HOLDING WALL STREET ACCOUNTABLE:
INVESTIGATING WELLS FARGO'S
OPENING OF UNAUTHORIZED
CUSTOMER ACCOUNTS
----------
Thursday, September 29, 2016
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10 a.m., in room
2128, Rayburn House Office Building, Hon. Jeb Hensarling
[chairman of the committee] presiding.
Members present: Representatives Hensarling, Royce, Lucas,
Garrett, Neugebauer, McHenry, Pearce, Posey, Fitzpatrick,
Luetkemeyer, Duffy, Stivers, Stutzman, Mulvaney, Hultgren,
Pittenger, Wagner, Barr, Rothfus, Messer, Schweikert, Guinta,
Tipton, Williams, Poliquin, Love, Hill; Waters, Maloney,
Velazquez, Sherman, Meeks, Capuano, Lynch, Scott, Green,
Cleaver, Moore, Ellison, Perlmutter, Himes, Carney, Sewell,
Foster, Kildee, Murphy, Delaney, Beatty, and Heck.
Chairman Hensarling. The Financial Services Committee will
come to order.
Without objection, the Chair is authorized to declare a
recess of the committee at any time.
Today's hearing is entitled, ``Holding Wall Street
Accountable: Investigating Wells Fargo's Opening of
Unauthorized Customer Accounts.''
I now recognize myself for 5 minutes to give an opening
statement.
We are here today because millions of Americans were ripped
off by their bank and seemingly let down by their government.
Fraud is fraud, theft is theft, and what happened at Wells
Fargo over the course of many years cannot be described any
other way.
In fact, a whole host of Federal laws were potentially
violated, including the Truth in Savings Act, the Fair Credit
Reporting Act, the Truth in Lending Act, the Electronic Fund
Transfer Act, the Securities and Exchange Act of 1933, the
Securities and Exchange Act of 1934, and the Sarbanes-Oxley Act
of 2002. All charges must be thoroughly investigated, and all
culpable individuals must be held accountable.
And while the fine that Wells Fargo will pay, roughly 3
percent of the bank's second quarterly profits, is tiny by Wall
Street standards, the harm caused to consumers and employees is
not. To the factory worker who just had her credit score dinged
because of the fraud Wells Fargo perpetrated, the cost is big.
To the waiter at the local diner living paycheck to paycheck
who had to pay fees associated with a fraudulent account, the
cost is big. To the Wells Fargo employee with kids to support
who lost her job because she refused to participate in the
scheme, the cost is big.
We will make sure those who were betrayed by Wells Fargo
are not forgotten. And it is on their behalf that our committee
has launched an in-depth investigation, Mr. Stumpf, of your
bank's activities.
And let me be clear, today's hearing is just the beginning
of our investigation; it is not the end. And, as I speak, our
committee is gathering thousands of pages of records and
documents from both Wells Fargo and the relevant Federal
regulators. In the coming weeks, we will be questioning Wells
Fargo executives. If necessary, I will not hesitate to issue
subpoenas, because we will do what is necessary to get to the
bottom of the matter.
Mr. Stumpf, we don't yet know what you knew, when you knew
it, and what you chose to do about it, but we know it happened
on your watch, and we hold you accountable for the answers to
why this happened.
At last week's Senate hearing, you were uncertain of many
matters. In the intervening days, we trust that you have had a
chance to refresh your recollection and to review your records;
therefore, we hope and expect you will provide more complete
answers today.
We need to know exactly when and how you and other
executives at Wells Fargo found out about this indemnant fraud.
We need to know today what you directed others to do about it
when you found out. We need to know today who in management is
being held accountable.
We already know that as far back as 2009, former Wells
Fargo employees started filing wrongful termination lawsuits
alleging fraudulent accounts and improper sales tactics were
taking place. Approximately 5,300 Wells Fargo employees were
fired over a 5-year period for these improper sales practices,
and perhaps as many as 2 million unauthorized accounts were
fraudulently opened.
Based on these facts, we will also be asking serious
questions of our regulators in the course of this
investigation. If the OCC had examiners on-site at Wells Fargo
during the time when these fraudulent accounts were opened, and
the CFPB was conducting regular examinations, why did it
seemingly take the L.A. Times to expose the fraud? And, once
exposed, why did it take almost 18 months for the CFPB to
initiate a supervisory review?
Today, I don't know the answers to the questions. Perhaps
our Federal regulators deserve a pat on the back, but perhaps
they deserve a swift kick on the backside. We will find out
which.
But we launched this investigation, ultimately, because it
is our job to hold both Wall Street and Washington accountable
and to protect consumers from the excesses of both. True
consumer protection is the preservation of competitive,
innovative, free markets that are vigorously policed for force,
fraud, and deception.
Mr. Stumpf, I know that Wells Fargo represents an iconic
brand. I know that your bank has a very rich and proud
heritage. I also know that you have hundreds of thousands of
good employees who had nothing to do with this sordid affair,
and who do good work in building their communities. But this
sordid affair does remind me why I trust markets and I do not
trust individual companies.
And, Mr. Stumpf, I regrettably have a mortgage with your
bank. I wish I didn't. And if I was in the position to pay it
off, I would, because you have broken my trust and you have
broken the trust of millions of others, and it will take a
long, long time to earn that trust back.
I now recognize the ranking member for 5 minutes.
Ms. Waters. Thank you very much, Mr. Chairman. And I thank
you for agreeing to hold this hearing so that we can examine
the fraudulent activity that occurred at Wells Fargo.
Mr. Stumpf, the word games stop today. Borrowing a
customer's money without permission is not a sales practice
violation; it's stealing. Using customers' Social Security
numbers to open credit cards without their consent is not
wrongful sales behavior; it is identity theft. So let's call it
what it really is: some of the most egregious fraud we have
seen since the foreclosure crisis.
For at least 5 years, Wells Fargo pushed aggressive sales
goals for low-wage employees that were so unrealistic and so
unattainable that some felt pressured to commit crimes just to
keep their jobs. It may have happened over 2 million times--2
million times. In fact, we have two former Wells Fargo workers,
Julie Miller and Ruth Landaverde, today in the audience who
have borne the brunt of your choices. Meanwhile, your senior
management, the board of directors encouraged, even bragged
about behavior amounting to widespread fraud.
Today, I hope you came prepared to explain both how and
why. While you personally told me you were prepared to take
full responsibility, we have seen your testimony in front of
the Senate Banking Committee and there are still answers that
need to be given. The testimony that we have witnessed in the
Senate trying to explain what happened is not satisfactory. And
we still do not have all the information we need to understand
how this happened, when the sales culture turned toxic, and who
knew about it and when.
Despite your statements to the contrary, any legitimate
investigation shows that executives at Wells Fargo either knew
or should have known much earlier than 2013 that these
practices were taking place.
I think that executive conduct at Wells Fargo deserves a
thorough investigation by the Department of Justice. Someone
responsible for the broken culture that led to this behavior
needs to be held responsible, not the lower-level employees who
have been left to bear the weight of the mistakes that have
been made.
This issue is personal for me. The size of Wells Fargo's
footprint in California means that many, if not most, of the
employees and customers who were victimized by this are my
constituents and neighbors. They don't deserve to have their
trust violated by Wells Fargo. No one did.
I'm still receiving calls in my office complaining about
Wells Fargo now. And one caller described how he went into the
bank and complained about excessive accounts that he knew
nothing about. The employees called the police on him, and he
was arrested. And yet violating the public's trust to drive up
profits is exactly what Wells Fargo did.
In the Senate hearing, it was revealed that even you
benefited from that, Mr. Stumpf. Your own bank account
benefited from that deception. Now, I know that you said you
take responsibility for these practices and that you are
conducting your own investigation and that you and other
managers are forgoing some of your compensation. That is
welcome, but let me be clear: It's not enough.
Unfortunately, this is not the first time we've seen
abusive practices at Wells Fargo. We thought that you were
working on these practices. Six years ago, your mortgage
executive sat right here in this very chair, reassuring my
subcommittee that you were committed to fixing Wells Fargo's
forgery of mortgage documents, and yet we haven't seen the
problem fixed. We've just seen it migrate to another part of
your bank.
So I hope today we can hear from you, Mr. Stumpf, because
the American public deserves to know what happened at Wells
Fargo and why customers were ripped off so blatantly and
repeatedly. You can also rest assured that this is just the
beginning and that we will be demanding more information until
we get to the bottom of this. And, of course, I urge your
cooperation.
And I must tell you that I have known you for a while; I've
communicated with you. At times, you have been very helpful to
my constituents. So I'm very disappointed, and we must get to
the bottom of this.
And I want to be able to receive the documents and
information that we requested from you. I'm told that they have
been refused. I think it is in your best interest to come
forward with those documents.
Mr. Chairman, I yield back the balance of my time.
Chairman Hensarling. The gentlelady yields back.
Today, we will receive the testimony of Mr. John Stumpf,
who is the chairman and CEO of Wells Fargo and Company. Mr.
Stumpf has held a number of senior management positions at
Wells and its predecessors, where he has worked for 34 years.
Mr. Stumpf, would you please rise and raise your right
hand?
[Witness sworn.]
Chairman Hensarling. Thank you. Please be seated.
Let the record reflect that the witness has answered in the
affirmative.
Without objection, the witness' written statement will be
made a part of the record.
Mr. Stumpf, you are now recognized for 5 minutes to give an
oral presentation of your testimony.
TESTIMONY OF JOHN G. STUMPF, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, WELLS FARGO AND COMPANY
Mr. Stumpf. Chairman Hensarling, Ranking Member Waters,
and members of the committee, thank you for inviting me to be
here with you today.
I am the chairman and chief executive officer of Wells
Fargo, where I've worked for nearly 35 years. It is my
privilege to lead this company, which was founded over 164
years ago and played a vital role in the financial history and
development of our country.
I am deeply sorry that we've failed to fulfill our
responsibility to our customers, to our team members, and to
the American public. I am fully accountable for all unethical
sales practices in our retail banking business, and I'm fully
committed to fixing this issue, strengthening our culture, and
taking the necessary steps and actions to restore our
customers' trust.
We should have done more sooner, but we will not stop
working until we get this right. This morning, I will update
you on a number of steps taken to address our retail bank sales
practices problem and make things right for customers who may
have been harmed.
At Wells Fargo, we have new leadership in our retail
banking business, focused on ensuring that all team members in
our retail bank provide the best service to our customers.
Secondly, we recently announced the elimination of product
sales goals for everyone in retail banking effective January
1st. Today, I am announcing that we are accelerating this
process and ending all product sales goals effective at the end
of this week. We want to make sure nothing gets in the way of
doing what is right for our customers.
Also, we now send out to all customers a confirmation email
approximately 1 hour after opening a savings or checking
account and an acknowledgment letter after a customer applies
for a credit card.
We're also making it right for customers. We have begun
contacting the customers with open credit cards identified by
PricewaterhouseCoopers to determine whether they wanted these
credit cards. It's early in the process, but so far we have
reached more than 20,000 of these customers and talked to them
about their credit card accounts. Fewer than 25 percent have
told us they either did not apply for the card or they cannot
recall whether they applied or not for the card.
For those customers who want the card, the card will remain
open. For any customer who does not want their card, we are
closing the account and informing the credit bureaus. Any fees
these customers may have paid already have been refunded, and
we are developing a process to deal with any other forms of
harm.
For deposit customers, we have refunded fees and are
contacting every single one of them across the country to
ensure that we have a full understanding of every customer
affected by this problem. In addition, we are voluntarily
expanding the scope of the reviews we have done to go back in
time to 2010 and 2009.
While these issues we will discuss today are deeply
disappointing and will take time to repair, they do not
represent the true culture and nature of Wells Fargo.
Some have suggested the problem was cross-selling, but that
is not the case. At its core, cross-selling is all about
deepening customer household relationships with products they
want, they use, and they value. It is not about improper sales
practices used to create unwanted accounts. That's not good for
our customers and not good for Wells Fargo. If we take care of
our customers, they will deepen their relationships with us and
trust us more with their business. That is good for customers,
who benefit from the lower costs we pass on, and that is cross-
selling done the right way.
In closing, I'd like to talk about my commitment to
accountability. When I say I am accountable, I am referring to
the actions our board took, at my recommendation, to forfeit
the stock awards that are the largest part of my compensation
for the past 3 years and any bonus this year, as well as my
agreement to work without salary until the board completes its
investigation. I respect and accept the board's decision.
And when I say I'm accountable, I also mean accountable for
leading Wells Fargo as the company restores the trust of
customers, team members, and investors.
Thank you for this opportunity to testify today.
[The prepared statement of Mr. Stumpf can be found on page
82 of the appendix.]
Chairman Hensarling. The Chair now yields himself 5
minutes for questions.
Mr. Stumpf, to the American people, this kind of feels like
deja vu all over again. Some institution is found engaging in
terrible activities, there's a headline, a fine, and yet no one
seems to be held accountable. Let's face it, the fine that has
been assessed to you is probably a rounding error, again, in
your quarterly earnings report.
With perhaps as many as 2 million fraudulent accounts over
the course of 5 years, and 5,000 dismissed employees, it's just
beyond credibility that somebody up the food chain didn't
either order this, condone it, or turn a blind eye to it.
So my question to you is, who is the highest ranking
official at Wells, who is the highest person in the management
team who has been dismissed because of these activities?
Mr. Stumpf. Thank you, Mr. Chairman, for that question.
As you know, within--or maybe you don't know, but within
the 5,300, there were managers and managers and managers of
those managers. We are doing a full review--
Chairman Hensarling. Were these branch managers?
Mr. Stumpf. Yes. About 10 percent or more were different
kinds of managers.
Chairman Hensarling. And nobody above the branch-manager
level?
Mr. Stumpf. There were managers of the branch managers and
a manager of those within the line of business.
But we're doing a full review of other control functions
within the company. That process has already begun. The board
is going to be involved; management will be involved. And, as I
mentioned, we have--
Chairman Hensarling. When will this be complete? When will
your own internal investigation be complete to hold management
accountable?
Mr. Stumpf. I can't give you a specific timeframe, Mr.
Chairman, but I will tell you, we're moving on that directly,
and we're going to get to the bottom of this.
Chairman Hensarling. Okay. Is anybody at the bank-holding-
company level being held accountable?
Mr. Stumpf. People will be reviewed across the board at
holding company activities, corporate activities. Anybody who
was involved in promoting or supporting this behavior will be
held accountable.
Chairman Hensarling. Okay, but holding people
accountable--isn't it true, Mr. Stumpf, that in the settlement
agreement Wells entered into with the OCC, the CFPB, and the
L.A. City Attorney's office, no individual admits guilt? Is
that correct? Is that part of that settlement agreement?
Mr. Stumpf. I believe we either did not admit or deny. So
the facts there are the facts that we agreed to.
Chairman Hensarling. Mr. Stumpf, let's go back to 2011,
which I think is the first year we know for a fact that these
fraudulent activities were taking place. The records that I
believe your bank has shared with us show that 939 employees
were terminated from the retail banking sector for improper
sales practice in that year. Does that comport with your
memory?
Mr. Stumpf. Yes, it does, Mr. Chairman.
Chairman Hensarling. Okay. So, in 2011, isn't it true that
Wells Fargo entered into a consent order with the Federal
Reserve that required Wells to cease and desist from certain
practices in the mortgage lending department and that you paid
an $85 million civil penalty? Is that true?
Mr. Stumpf. Mr. Chairman, that's true. That was in a
different business area, but that is a true statement.
Chairman Hensarling. It was in a different business area,
but I will read from the consent order: ``Wells Fargo's
internal controls were not adequate to detect and prevent
instances when certain of its sales personnel, in order to meet
sales performance standards and receive incentive compensation,
altered or falsified income documents and inflated prospective
borrowers' incomes to qualify those borrowers for loans that
they would not otherwise have been qualified to receive.'' This
sounds eerily like the retail banking division.
Also, as I understand it, the Fed required Wells Fargo to
submit a plan to investigate and to change policies and
procedures.
I think you testified on the Senate side that you were not
personally aware of the problems in the retail banking division
until 2013. Surely you were aware of the problems in the
mortgage lending division in 2011, correct?
Mr. Stumpf. That is correct. And Mr. Chairman, we shut
that division down. That was even shut down--
Chairman Hensarling. But if you saw the problem in one
area of the business, why didn't you thoroughly investigate in
the other areas?
Mr. Stumpf. There is no question, Mr. Chairman, we should
have done more sooner.
Chairman Hensarling. It just seems, Mr. Stumpf, that 5
years later your bank is being fined for exactly the same
transaction, and, again, it just feels like deja vu all over
again. And I hope and trust, but please tell me, that these
fines are not simply a cost of doing business for Wells.
Mr. Stumpf. Mr. Chairman, it's not a cost of doing
business. This has been--this is a serious trust issue with our
customers. But I also want to say that there are 268,000 people
who came to work this morning at Wells Fargo trying to do their
very best to serve customers, and they do it wonderfully every
day. And I don't want our culture to be defined by these
mistakes, and we take accountability for them.
Chairman Hensarling. I understand that, Mr. Stumpf, but it
appears to be a little late. And, particularly, when you got
caught doing it 5 years ago, and you get caught doing it once
again, somebody has to be held accountable.
I now yield to the ranking member.
Ms. Waters. Thank you very much.
Mr. Stumpf, you have said repeatedly that you were not
aware of this widespread fraud in your bank until late in 2013,
and it appears that there were activities going on that
indicate you may have known much earlier than that.
For example, in 2007, just months after you became CEO, the
sales quality manual for the community banking division was
updated with your executive guidance, as the manual states.
That sales guide reminded employees of what should have been
obvious, that they needed to obtain a customer's consent before
opening an account. And so, am I to understand that you
discovered that there was something going on and there was a
need for you to do this?
That manual also said that sales practices that showed
``questionable activity'' would be sent via high priority to
bank executives. So it appears that you knew something in 2007,
that unauthorized accounts were a big enough problem that you
had to correct your employee manual.
And, as early as 2008, I have documents from court filings
showing your employees were contacting your ethics hotline
reporting bank fraud and complaining to managers over
unauthorized accounts. And so it looks as if you certainly knew
in 2008.
What's more, I have here a consent order with the Fed from
2011 that puts your company on watch for sales quotas and
compensation schemes that pushed employees to break the law.
Does this sound familiar?
Mr. Stumpf. Ranking Member Waters, I acknowledge that we
had a 2011 order from the Federal Reserve. And I think we have
always known, as in any sales organization, you're going to
have to be diligent, because not every team member will do
everything right every day. So we have controls built in, we
have ethics lines. And I knew and I still know that you put
people to work every day and mistakes are going to happen.
It was not until 2013 when I learned that this problem had
been growing, it had been more prevalent and in a certain part
of the company, which happens to be in the wonderful part of
California in which you live.
So these are things we've been working on. All of our
strategies around training team members, who get 2 weeks of
classroom training before they go out into a branch, is about
doing things right, about ethics.
And I'd also just want to remind the committee that the
vast majority of our people who had the same opportunities, the
same training, and the same goals, did it right every day for
our customers. In fact, our customer loyalty scores now are the
highest they've ever been in our company's history.
Ms. Waters. Let me just point out some other activities
that should sound familiar to you.
While you were under the consent order for the mortgage arm
of Wells Fargo, this fraud was surging in the retail arm of
Wells Fargo, but you didn't connect the dots on these high-
level trends across the bank. Did you know in 2011 that perhaps
your sales incentives were driving this fraud?
Mr. Stumpf. Congresswoman, I knew that--at least, I know
today that we should've done more sooner. But maybe--and not
only maybe--some of our people--and, again, it's 1 percent, but
that's a big number for a big organization. Anytime--any one
time we have 100,000 people in our branch network, and if 800
people, for whatever reason, either misunderstood or used this
as a way to be dishonest and break our code of ethics and do
something wrong for a customer and something wrong for us,
that's why we're removing sales goals. They'll be gone as of
this weekend. In fact, we don't even think they're an important
requirement anymore for us to continue to grow.
Ms. Waters. Mr. Stumpf, some people assume that you
changed your customer agreement to add forced arbitration
clauses for checking accounts and that these clauses prove to
be incredibly helpful when you use them to dismiss multiple
customer lawsuits. Is that true?
Mr. Stumpf. That is not true. I actually think arbitration
does make sense. But, in this case, for any customer who might
have been harmed in this situation, we're also paying for a
mediation process so they have a mediator.
Ms. Waters. All right. Thank you very much. My time is up,
and I will get to this later on if I can. Thank you. I yield
back.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from Texas, Mr.
Neugebauer, chairman of our Financial Institutions
Subcommittee.
Mr. Neugebauer. Thank you, Mr. Chairman.
Mr. Stumpf, here we go.
You serve as both the chairman and the CEO of Wells Fargo.
Is that correct?
Mr. Stumpf. Congressman, that is correct.
Mr. Neugebauer. And, as you're aware, Section 972 of Dodd-
Frank requires an issuer of securities to disclose the annual
proxy statement, the reason why the issuer has chosen to allow
the same person to serve as the board chairman and the CEO.
This year, Wells states that your dual role is a result of your
extensive experience and knowledge regarding the company and
provides the most efficient leadership of the board and the
company.
Mr. Stumpf, do you think it's a good idea for the same
person to serve as both chairman of the board and CEO?
Mr. Stumpf. Thank you, Congressman, for that question.
In our company, we have 14 outside directors. We have a
lead director. All directors are New York Stock Exchange-
independent, by their standards. I am not a member of any
standing committee of that board. The independent directors and
the lead director help set the agenda for the boards. They
always have meetings that are in executive session without me.
And as you probably read about what happened this weekend--
because we filed an 8-K yesterday about actions that they took
as an independent board, and I was not part of that. So the
board acts quite independently.
Mr. Neugebauer. The current situation is that you've
recused yourself from board decisions on this situation?
Mr. Stumpf. Congressman, you're right. I have either
recused or I've not been invited. I'm not part of that. And I
serve at the pleasure of the board.
Mr. Neugebauer. So you gave me a good idea of how your
board is structured, but the original question was, do you
think that's a good idea, for the CEO to be also the chairman?
Would the board and the stock shareholders, the customers, be
better served if there was some separation in that area?
Mr. Stumpf. Thank you. For our company, I believe we have
the right structure. But, again, I serve at the will of the
board, and the board can make a decision on that.
Mr. Neugebauer. Now, Mr. Stumpf, you testified that you
learned of these violations sometime in 2013. When did you
inform the board that this was an issue?
Mr. Stumpf. Yes, so the board had high-level ethics line
comments or questions or high-level kinds of activities around
people who left the company, involuntary terminations, really
through the 2011-2013 timeframe. After we learned--
Mr. Neugebauer. Wait, wait, wait, let me have you repeat
that. You said the board was having some discussions as early
as 2011 about this?
Mr. Stumpf. I was saying that the board, from 2011 to
2013, would get reports at a committee level, at a high level,
about ethics lines requests or information at, not a granular
level, but at maybe the company level--
Mr. Neugebauer. But you didn't find out about it until
2013?
Mr. Stumpf. And, in 2013, it became--I became aware that
there was an issue in the southwestern part of the country. And
by 2014 then--this was late in the year--by 2014, we started to
provide more information to more committees of the board. And
then by 2015, the board had a--the risk committee of the board
had a complete report on that issue.
Mr. Neugebauer. So, as chairman of the board, the CEO,
when did you tell the board, we have a problem?
Mr. Stumpf. It was in 2015 that we had a full report.
Again, as I said in my testimony to the Senate and here today,
in 2014, we were starting to get more granular information that
this was a risk area for the company to focus on.
Mr. Neugebauer. Did you ever disclose this issue on a 10-K
filing?
Mr. Stumpf. We have--our 10-K--all of our K or Q filings
are facts and circumstances, what we knew at the time. And as
recently as our second-quarter Q this year, when we use our
disclosure teams and our compliance teams to look at this
issue, the facts and circumstances, we believed, were not
material.
Mr. Neugebauer. I'm not for Congress setting the corporate
structure, but I do think there is some question here whether,
in this particular situation, the company would've been better
served with those roles being separated.
With that, I yield back.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentlelady from New York, Mrs.
Maloney, ranking member of our Capital Markets Subcommittee.
Mrs. Maloney. Mr. Stumpf, we know now that whistleblowers
first contacted the Consumer Financial Control Board about the
fraud at Wells Faro in mid-2013. And you said in your Senate
hearings last week that you first found out about the fake
accounts in late 2013. And the L.A. Times article about the
scandal was published on December 21, 2013.
I have right here your form for filing, which I'd like to
submit for the record--
Chairman Hensarling. Without objection, it is so ordered.
Mrs. Maloney. --that shows that on October 30, 2013, you
sold $13 million worth of Wells Fargo stock on the open market.
That is by far the largest open-market sale of Wells Fargo
stock that you made in your 9 years as CEO.
So my question is, did you dump $13 million of Wells Fargo
stock, which you did through your family trust, right after you
found out that your bank had been fraudulently opening hundreds
of thousands of scam accounts ripping off your customers?
Mr. Stumpf. Thank you for the question.
First of all, the vast majority of our people go to work
every day and try and do the right thing--
Mrs. Maloney. Excuse me. That is not my question.
Mr. Stumpf. But I will get to your--
Mrs. Maloney. Excuse me. Excuse me. My question was, did
you dump the stock after you found out about the fraudulent
accounts? Because it seems that the timing is very, very
suspicious, and it raises serious questions.
Mr. Stumpf. I did not sell shares at the time because of
anything related to--
Mrs. Maloney. But your Form 4 says you did sell the
shares.
Mr. Stumpf. I sold the shares. Today, I hold 4 times as
many shares as I'm required. I want to stand with our--
Mrs. Maloney. Did you sell these shares or not?
Mr. Stumpf. I sold those shares, and I sold them with
proper approvals, with no view about anything that was going on
with sales practices or anything else.
Mrs. Maloney. Well, it seems very, very suspicious that
your largest sale was right after your $1.8 trillion bank was
turned into a school for scoundrels.
You acknowledge that your bank fired over 5,300 people who
got caught willfully defrauding your customers. And a recent
lawsuit alleges that you fired even more people because they
refused to willfully defraud customers. And then you blame the
low-level people, you fire them. You make profits, then you
dump the stock.
So I just have to say that it seems that when you found out
about the fake accounts, instead of helping your customers, you
first helped yourself.
So, moving right along to the next question, Mr. Stumpf,
you've said that Wells Fargo is conducting a review of all
accounts going back to 2009 in order to identify any scam
accounts. But last week, in the Senate hearings, you were asked
if you would extend the review period to before 2009, and you
refused to commit to extending the review period back to even
earlier.
So if you were presented with hardcore evidence that Wells
was engaged in some of these practices, these illegal scams
prior to 2009, would you change your mind about extending the
review?
Mr. Stumpf. Thank you for that question.
We have agreed with our regulators to go back to 2011. We
voluntarily said last week that we will go back to 2010 and
2009. I've told our team to leave no stone unturned. And if we
find a situation where a customer is harmed that goes back
prior to that, we will make it right for that customer.
Mrs. Maloney. Thank you, because I have the evidence right
here. And I'd like to submit to the record a court case in
Montana in which six Wells Fargo employees were fired for,
among other things, ordering debit cards for customers without
their permission, which is clearly illegal. And, according to
the court documents, these illegal sales go back to 2007.
Chairman Hensarling. Without objection, it is so ordered.
Mrs. Maloney. So now we have evidence of illegal sales
practices going back to 2007. Will you agree to extend the
review period back to 2007 to cover this evidence that we are
submitting today?
Mr. Stumpf. Again, Congresswoman, we're going to go back
to 2009. If we can find--and we're going to contact every
customer. If we find--
Mrs. Maloney. But this is evidence that it went back to
2007. And we thank you for going back to 2009. My question is,
we have clear evidence that it goes back to 2007. Will you live
up to your commitment of helping your customers who were
defrauded, with clear evidence, back to 2007?
Mr. Stumpf. We will go back, and if we find any evidence
of any customer who was harmed in 2007 through our review,
through 2009, we will take care of each customer.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from North Carolina,
Mr. McHenry, vice chairman of our committee.
Mr. McHenry. Thank you, Mr. Chairman.
So I have the honor of representing the suburbs of
Charlotte, North Carolina. North Carolina had an incredible
banking culture over decades. Yet, in Charlotte, First Union, a
homegrown bank with a great reputation, went through
challenging times in the economic crisis, as you well know.
But, before that time, they teamed up with a bank based in
Winston-Salem: Wachovia.
And, as you know, in acquiring what was then called
Wachovia, which is really First Union and Wachovia, the pitch
was that your culture from California was very similar to this
North Carolina culture, this banking culture. And as you well
know, John Grimes Medlin, who was a great chairman of Wachovia,
sort of imbued in Wachovia this culture that a banker is a
civil servant as well. There's this obligation to society they
have and their community.
You eulogized him.
Mr. Stumpf. Yes.
Mr. McHenry. Paid tribute to that culture.
Mr. Stumpf. Yes.
Mr. McHenry. So I want you to think about that culture.
Because what is so sad to me is that pitch of culture doesn't
conform with my experience with my constituents in North
Carolina. It doesn't conform to what I know about First Union,
what I know about Wachovia, and this cultural pitch that you
had in acquiring them in the financial crisis. I know you have
a huge head count in North Carolina; we're grateful for it. But
what's sad to me is the impact of this on them and those
employees you have in North Carolina.
I wanted to look at your code of conduct that you tout. So
let's look at your code of ethics and business conduct. You
said in your message as CEO, ``We are all responsible for
maintaining the highest possible ethical standards in how we
conduct our business and serve our customers.''
The code of ethics, in fact, says, ``Our code applies to
all team members, including officers, as well as directors of
Wells Fargo and Company and its subsidiaries.'' It also says,
``We are all accountable for complying with the code as well as
all company policies and applicable laws.'' And, finally,
``It's critical that all team members have a solid
understanding of our company's code of ethics and business
conduct and understanding that noncompliance with the policy
may result in disciplinary action up to and including
termination of employment.''
You clearly have failed. You've clearly failed in your own
ethical standards internally. You have broken, and your company
has broken, longstanding law. You've broken longstanding
ethical standards that you have within your company. This has
nothing to do with this debate about Dodd-Frank or anything
else. You've broken a longstanding law, and you've defrauded
your customers.
How can you rebuild trust? And how can you get through this
thing? What standards are you holding yourself to that sends
the message to the rest of these folks in your organization who
look to you for leadership and guidance? What are you doing to
restore that?
Mr. Stumpf. Well, thank you, Congressman.
The culture of the company is strong. And I don't--I know--
Mr. McHenry. It's really hard to say that when you're
before Congress for the second time, and behind you was all the
settlements you've had for problematic relationships you've had
with your customers by taking their money--right?--counter to
the law, counter to your ethical standards.
So it's great that you say you have a strong culture, but
why are we here today? How are you addressing that?
Mr. Stumpf. Yes, we are addressing it.
First of all, with respect to culture, we have 268,000
people who have made their life's work and careers out of
helping customers. There are people today who aren't--
Mr. McHenry. That's why I raised this in the way that I
do, by severe disappointment, severe disappointment. That's
all. You broke the law. We make the law in Congress. This is
not new stuff, that all of a sudden Congress changed some rules
and you can't have your employees create fake accounts and take
fees from customers unknowingly, unwittingly. There has never
been a time in human history when that has been ethical, right?
Mr. Stumpf. Congressman--
Mr. McHenry. So for you to say the culture's okay, it
seems to me that you're just tone deaf to this.
The final thing you need to think about and your board of
directors need to think about is this: The impact you have is
not simply on your institution but the wider conversation on
how my consumers can access credit. And the implications on
what you've done and your leadership has done has this broader
societal impact that is very negative.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentlelady from New York, Ms.
Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
Mr. Stumpf, now that you were on the Senate side and you
testified and the Senators asked you, of the 5,300 Wells Fargo
employees who were fired for their misconduct, how many of them
were fired because they failed to meet sales quotas? At that
time, you stated that you didn't know.
Now that a week has passed and you have had a chance to
consult your records and speak to your staff, are you prepared
to tell us how many employees were fired for failing to meet
their sales goals?
Mr. Stumpf. Thank you, Congresswoman.
Of the 5,300, which is about 1,000 people per year out of
our team--and I don't want to minimize it; it was 1 percent,
because we have about 100,000 people in our bank branches at
any one time--all of those people, through our investigation,
were terminated because of their unethical behaviors. We found
them, we decided that we don't--we can't have them here, they
are not consistent with our culture and our ethics.
Ms. Velazquez. Out of that 5,300 employees--
Mr. Stumpf. Yes.
Ms. Velazquez. --were there any employees who were fired
because they didn't meet their sales quota?
Mr. Stumpf. They were--from my understanding--
Ms. Velazquez. I'm not talking about the 5,300. Outside of
that.
Mr. Stumpf. Oh, outside. Outside of that, my understanding
is that people should not be fired, terminated, for missing
sales goals. I'm not saying it didn't happen in some cases--
Ms. Velazquez. Why should I trust that was the case?
Mr. Stumpf. And we're doing a review of employees who come
forward who might have been terminated for that.
Ms. Velazquez. Okay. So my next question is, if your
review shows that there were employees who were fired because
they didn't meet their sales quota, would you be rehiring those
individuals?
Mr. Stumpf. Yes, well, first of all, we don't have sales
quotas; we have goals. And there are other goals that our
people also have as part of their performance management. We're
reviewing that, and we're going to try to make it right for
every team member.
Ms. Velazquez. Mr. Stumpf, I'm sure you are aware that
Wells Fargo is the most active SBA 7(a) lender in the country.
Mr. Stumpf. Correct.
Ms. Velazquez. As ranking member of the House Small
Business Committee, I am very concerned that the illegal
practices uncovered by the CFPB on the consumer side may have
spread to the small-business side. Were your frontline
employees under similar pressure to cross-sell products to the
bank's SBA 7(a) clients?
Mr. Stumpf. First of all--thank you, Congresswoman--we are
the Nation's largest small-business lender. I am very proud
that we do a lot of work helping men and women across this
country start businesses and so forth.
That's a very different business, and I don't know of any
product sales goals--which, again, we've eliminated in our
retail bank--in that business. It's a very different business.
Ms. Velazquez. So the 7(a) program is just a fraction of
your overall small-business lending portfolio. Can you provide
us today with assurances that these illegal practices did not
affect any of your small-business clients at Wells Fargo?
Mr. Stumpf. Yes, I don't have that information in front of
me. I'm happy to work with my staff or team and get back to
your staff and cooperate on that as best I can.
Ms. Velazquez. Given the fact that you lack the leadership
to give us assurances that this was not the case, I'll be
writing to the SBA Administrator so that they can review all of
the 7(a) portfolio to make sure that we protected small
businesses as well as taxpayers.
My next question to you is, now that you have decided to
end product sales goals and financial rewards, have you
considered raising the salaries of your retail banking
employees in order to make up for this loss in compensation?
Mr. Stumpf. Yes. We are working on a new incentive
program. It'll be out by the first of the year. And we want to
make sure that our team members are totally aligned with our
customers. And we want to make sure that compensation for our
team members--again, the vast majority do it right--are not
hurt in this process.
Ms. Velazquez. I know that you're not aware, but it's very
difficult for any person in this country to live on a $25,000
salary.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from New Jersey, Mr.
Garrett, chairman of our Capital Markets Subcommittee.
Mr. Garrett. Thank you, Mr. Chairman.
So, Mr. Stumpf, let me start by making a few observations,
and then I'll end with a couple of questions.
First and foremost, I find it, as we all do,
extraordinarily troubling that as I look through the history,
the timeline of the scandal, a timeline that stretches over
years, we see, as has already been testified to, 5,000 Wells
Fargo employees were dismissed for their involvement in opening
unauthorized accounts.
What's also interesting and troubling is the firings did
not happen all at one time. My understanding, as we've heard
already today, is that roughly 1,000 employees per year, in
2011, 2012, 2013, 2014, and 2015.
It's extraordinary. How Wells Fargo management did not
actively and decisively move to stop those activities after the
first 100 or 500, 750, or 1,000 employees were fired is beyond
me. The fact that it was allowed to go on and on and on for
years is apparently a failure of corporate governance, and a
failure, quite candidly, of your management to do what is
foremost, and that is to protect the customers who have trust
in you.
What concerns me even more, however, is that it appears
that most of the 5,000 employees who were fired were low-level
or mid-level employees. I think the chairman just found out the
highest level was a branch manager. And it doesn't even include
those who resigned due to the culture at Wells Fargo. As I say,
meanwhile, to the best of my knowledge, no senior executives
have been held accountable in the same manner that the lower-
level employees were. I would not be surprised if a number of
those people ended up losing their homes or going into massive
debt after they were dismissed.
No, I'm not defending their actions, just making a point
that we have a problem in this country, where it would seem, as
we've seen previously, that the well-connected here in
Washington, the elite, if you will, and the well-connected on
Wall Street, seem to play by one set of rules, while everyone
else has to play by another.
Yes, I know you just lost, reportedly, I hear, $41 million
of your salary, but if I understand that correctly, that's only
a quarter of your pay over the last decade or so. And so you
will forgive all of us if we don't really feel that sorry.
The second point I'd like to make is that, under Dodd-
Frank, Wells Fargo remains fully eligible for taxpayer bailout
going forward under Title II of the law should you run into
trouble going forward. Taxpayers have already spent a lot of
money bailing out poorly run Wall Street firms over the last
decade. Mr. Stumpf, I hope you're aware that the anger now
directed at you by my constituents and others around the
country isn't just over the actions of the employees; it's the
fact that they seem to be forever on the hook to underwrite
whatever kind of risky or, in this case, fraudulent activity
Wells or other large banks engage in.
Fortunately, earlier this month--I'll just make a
sidenote--we passed out a bill out of this committee, the
CHOICE Act, which will ensure that if Wells Fargo does run into
trouble again, it's only its shareholders and its management
that would pay the consequences and the taxpayers will no
longer be on the hook.
The third and final point I'll make--and I know they're not
here, but, once again, the financial regulators apparently
were--more than ``apparently''--completely asleep at the wheel
as this massive fraud was occurring.
If you look at one of those, the CFPB, the CFPB has only
one job in a regulatory framework, and they completely blew it.
It took a reporter from the L.A. Times to uncover what was
going on at Wells Fargo. And so I hope my friends on the other
side of the aisle will keep that in mind as they may pat the
CFPB on the back for a job well done.
In the time remaining, let's get to the securities
questions. The Securities Exchange Act requires a public
company to keep its disclosure in place--that's under SOX--
requires the CEO and the CFO to attest to financial statements.
You referred to some of that.
Are you saying that all of those quarterly reports you were
filing, that the information you had in 2011 and 2012 and 2013
and 2014, none of that information was material?
Mr. Stumpf. At the time, given the facts and the
circumstances, we filed accurate reports, and we did not
believe it was material.
Mr. Garrett. And when you got the PricewaterhouseCoopers
analysis--when was that, by the way?
Mr. Stumpf. That was late in 2015, early 2016.
Mr. Garrett. And, as soon as you had, has that been filed
as a material statement?
Mr. Stumpf. We considered the facts and circumstances, and
we believed that not to be material.
Mr. Garrett. It's not material. Why not?
Mr. Stumpf. Remember--or at least--the PwC material looked
at 93 million accounts that were opened over 4 years. They
could not rule out, through large data analytics, about 1\1/2\
percent of those accounts. That's still a lot because of the
size of the organization.
Mr. Garrett. Well, that, to me, Mr. Chairman, if that's
not material, this occurring over a 5-year period of time, a
systemic problem in the organization, I don't know what is.
I yield back.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from California, Mr.
Sherman.
Mr. Sherman. Mr. Chairman, the American people need an
assurance that this cross-selling mania that has afflicted
Wells Fargo is not to be found at the other big banks. And I
would urge you to have hearings where we hear from the CEOs of
Bank of America, Citigroup, and others.
And, until then, I hope that you would join with me in a
letter of inquiry to ask what new account-opening quotas they
had for their bank tellers, how many people they fired for not
meeting their quotas, or how many people they fired for opening
phony accounts.
We have Wells Fargo before me, but I don't think, Mr.
Stumpf, that you should be alone in this joyous experience.
Your colleagues should at least come forward with some
assurance.
We are now engaged in an important national ritual where
the CEO comes before the Representatives of the American people
to apologize, to take full responsibility, to do so humbly.
Mr. Stumpf, welcome to Washington. What plane did you fly
in on? What airline?
Mr. Stumpf. Virgin American.
Mr. Sherman. And when you came to the Senate?
Mr. Stumpf. I think it was United, but it was one of the
two.
Mr. Sherman. Okay. It shows Wall Street has learned
something. Thank you.
Mr. Stumpf. Thank you.
Mr. Sherman. Now, you have these forced arbitration
clauses in your agreement with your customers. You said, oh,
they can have mediation too. Some of them want their day in
court.
Are you going to hold them to these forced arbitration
clauses and screw them again out of their day in court, or are
you willing to waive those clauses and say, if you were caught
up in this, you get your choice, whether you have arbitration
or not?
Mr. Stumpf. Thank you, Congressman. I believe in
arbitration. I think it's a fair way to resolve disputes.
Mr. Sherman. Well, but your customers may want something
else. Are you going to deprive them of that?
Mr. Stumpf. No, we're not. We're going to have them--we're
going to pay for a mediator, and we--
Mr. Sherman. They want their day in court. Are you going
to screw them out of that?
Mr. Stumpf. We're taking this very seriously. I told--
Mr. Sherman. Will you let them go to court if they want to
go to court? Yes or no?
Mr. Stumpf. No, but with an explanation.
Mr. Sherman. ``No, but.'' Okay, thank you. That is a no.
This sham was not an attempt to steal a few million dollars
in fees from your customers, although that's important, because
you could say that a few million dollars wasn't material. What
was material is the price of your stock. You opened 2 million
phony accounts and then went and told--and it had to be
material, because you were bragging about it to the people
investing in your stock that you had higher penetration rates,
more accounts per customer, that the number of banking
customers that had credit cards had grown from the mid-20
percent up to 42 percent. So it had to be material. You were
talking about it.
The peak firings, according to your own documents, was in
2013. So you knew you had a problem then.
Mr. Stumpf. Correct.
Mr. Sherman. Why didn't you tell shareholders, our
penetration rates are phony, our new accounts are phony
accounts, and when we tell you we're deepening our relationship
with our customers, we're doing so by putting them through the
wringer? What internal audit system did you have that assured
you that you didn't have a material problem?
Mr. Stumpf. Congressman, I have to push back here. This is
the behavior of people that we found, that we did not want. And
the vast majority of everything we do is right by our team
members and customers.
Mr. Sherman. Mr. Stumpf, you were firing, according to
your own documents, the highest number of people in 2013, but
bragging about your penetration rates, the number of accounts
opening, in 2014. So you knew it was material to shareholders
and you knew it was a phony number that you'd fired people for
falsifying.
Mr. Stumpf. Congressman, may I just have a second? Because
we have gone back and looked. The 2 million accounts could not
be ruled out. We don't know if those are good accounts or not
good accounts, and we have already looked at 20,000 credit
cards.
Mr. Sherman. Reclaiming my time, sir, you fired 5,300
people. You took 5,300 good Americans and turned them into
felons with a system that you created, benefited from, and
drove your stock price up by bragging about your levels of new
accounts.
Mr. Stumpf. Congressman, I have to disagree with that.
Mr. Sherman. I'm not surprised. We have institutions that
are too-big-to-fail. In 2008, we found that they were too-big-
not-to-bailout. Attorney General Eric Holder has told us that
they are too-big-to-jail, saying that he fears bringing a
criminal indictment. We now learn that they're too-big-to-
manage, and too-big-to-regulate. It's time to break them up.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Missouri, Mr.
Luetkemeyer, chairman of our Housing and Insurance
Subcommittee.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Today we are here to confront, in my judgment, a total
travesty in the financial market. The consumers in this case
were failed on all accounts. Their financial institution with
whom they entrusted their families' finances failed them. The
Federal regulators who were charged with overseeing their
protection failed them. The Federal regulators in charge of
Wells Fargo failed to stop the ripping off of consumers, and
the consumers lost. And slapping a bank with a fine isn't going
to make that go away. Only 5 percent of that fine is going to
go back to the consumers who were harmed.
Mr. Stumpf, giving back your bonus isn't going to make that
go away. More rules and regulations aren't going to make this
go away. The fact is regulators sat in that bank for years and
did nothing. Meanwhile, thousands of employees were being fired
for these bad practices, yet nothing was changed to address the
issues. The regulators need to be doing their job as well from
day one. Instead, the institution pushed forward with a
whatever-it-takes approach to meet sales targets, and
regulators sat idly by, either oblivious or uncaring of these
bad practices, even after reported in the news. And to top it
off, regulators neglected to fulfill their enforcement
obligations after the fact. Instead, they opted for a quick
settlement and waived their right to pursue additional action
for other violations so they wouldn't be viewed as late to the
game. Wall Street needs to be held accountable, but so does
Washington. That's what we're here today for.
So my question to you, Mr. Stumpf, first is, how many
regulators do you have in your bank on a daily basis?
Mr. Stumpf. I don't have a precise count of that.
Mr. Luetkemeyer. Just roughly.
Mr. Stumpf. I think there is--maybe the OCC, our
prudential regulator, I'd pick 80, for example.
Mr. Luetkemeyer. Okay. The CFPB has some folks in there
pretty regularly as well, do they not?
Mr. Stumpf. I don't know the number on that.
Mr. Luetkemeyer. Okay. I'm just kind of curious. As a
former bank regulator, as well as a banker, this is a really,
really disappointing situation for me--
Mr. Stumpf. I couldn't agree more.
Mr. Luetkemeyer. --from the standpoint that I tell people
I'm shocked and dismayed. I'm dismayed that the bank allowed
this to happen, because you did have a culture in place that
allowed this to happen. And I'm shocked that regulators sat on
their thumbs this long and did nothing. And while you're being
fined, which I think is appropriate, the regulators ought to be
fined as well. For them to take the fine and keep it is a
travesty. They need to be fined as well and let that money go
back to consumers, because they were asleep at the switch as
well. There is so much blame to go around on this, it's
unbelievable.
A while ago, you made the comment that you have a good
culture in your institution, that this shouldn't be happening.
Well, Mr. Stumpf, your own testimony says that you're firing a
thousand people a year, a thousand people a year. There is only
one way that can happen, in that there is a culture there that
allows that to happen year after year after year. There is a
laissez-faire approach to what you're doing in your bank.
Somewhere along the line somebody just ought to call a timeout
and say, enough is enough, this can't continue. And yet year
after year, you're firing people, trying to hope this thing
goes away, and the regulators are watching it and still sitting
on their thumbs. These actions must have consequences, and for
not only you, but they need to have consequences for the
regulators as well.
Mr. Stumpf. Congressman, thank you for that question,
because I want to tell you that we did do things. In 2011,
within the business, they moved the compliance--or the concern
for this issue into a compliance area. By 2012, they were
reducing goals and doing more ethics training. By 2013,
corporate resources were brought in. And we worked with the
OCC. In 2014, more reductions in goals. In 2015--and the OCC
also was in 2013--we did our study. This does not represent the
culture. In fact, we do an outside company--
Mr. Luetkemeyer. I respectfully disagree with you, Mr.
Stumpf. I've been in business like this all my life. You can't
tell me that when you have to fire people year after year after
year after year that there isn't a problem. Now, for a year or
two, that's one thing, but for 4 or 5 years? Your own testimony
says this.
I have another question. I need to go on. In my examining
days, I examined a bank one time and found a teller skimming
money out of her cash drawer. I took it to the president and he
said, well, you know, she is a good employee, as long as she
keeps it to a minimum, I think we're going to be okay. My jaw
hit the floor. This reminds me of that situation. As long as
they keep it to a minimum, I think we're going to be okay. My
comment back to him at that point was, have you reported this
to your blanket bond insurance company that has a dishonesty
clause on it?
Do you have a blanket bond or do you self-insure?
Mr. Stumpf. We have a fidelity bond, and that's why we
draw a very bright line. When people do the wrong thing, they
cannot be here.
Mr. Luetkemeyer. Okay. My question is, when did you report
this action of your employees to your blanket bond company?
Mr. Stumpf. I don't--we have a group that does that, our
corporate relations with our legal team. And I can assure you
that--we can have our people get that to you. But there is a
very bright line.
Mr. Luetkemeyer. This is a really, really big question,
because if you didn't report that immediately when you found
this going on, and you allowed for year after year to have a
thousand people--
Mr. Stumpf. We do that.
Mr. Luetkemeyer. --your blanket bond company is going to
be going bonkers over this. We will have a request for that and
I hope you will answer that.
Mr. Stumpf. We'll work with your team.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from New York, Mr.
Meeks.
Mr. Meeks. I can't believe some of what I'm hearing here.
So let me understand, you've been the CEO since 2007. You've
been the chairman of the board and the CEO since 2010, is that
correct?
Mr. Stumpf. That is correct, Congressman.
Mr. Meeks. And in the time that you have been the
chairman, I have a chart here that shows you've been penalized
almost systematically every year since you have been in charge.
Every year: $1.2 billion in April of 2016; $53 million in
October of 2015; $4 million in June of 2015; another $24
million in January of 2015; $5 million in September of 2014.
And I could go on and on: $869 million in September 2013, while
you were the CEO, right?
And you're going to tell me that there is not a culture of
something wrong at Wells Fargo, when you are the head--you get
credit, you get credit as CEO when you bring in all this money,
because that's how you get your bonuses. Is that not correct?
You get a bonus from your board because ``X'' amount of dollars
come in. But yet you are telling me that you don't have the
responsibility of losing your position when you have a culture
of being fined and costing the bank year after year, month
after month? There is no responsibility? You can just stay to
be the chairman and the CEO? Is that what you want us to
believe?
Mr. Stumpf. Congressman, that is not the case. I serve at
the pleasure of the board. I am willing, I've told you--
Mr. Meeks. Then the whole board needs to go, if they are
going to allow someone to be in charge when time after time--
you just talked about firing 5,300 employees. When you found
out that they were doing something wrong, they were fired--
Mr. Stumpf. Correct.
Mr. Meeks. --because they were doing something wrong.
Well, something is going wrong at this bank, and you are the
head of it. So shouldn't the board then turn--from your own
admission, if the buck stops with you, as you came out here and
said, I apologize, the buck stops with me, and you have to also
admit that criminal activity was going on in your bank, then
you should be fired because it stops with you.
Mr. Stumpf. Again, Congressman, the board has that power.
And my energy right now is to lead this company forward. I also
want to remind--
Mr. Meeks. But you came here and you started out by
saying, I apologize, et cetera. If somebody walked into Wells
Fargo tomorrow and robbed your bank or defrauded your bank and
then after they are caught they say, well, I'm sorry, I'm going
to take full responsibility for robbing this bank and I am
sorry that I robbed this bank, so please don't prosecute me
because I am sorry now that I robbed this bank, would you allow
the person just to walk out after robbing your bank because he
is now sorry that he robbed this bank after he took the money
already?
Mr. Stumpf. Congressman, I see something very different
between being honest and breaking our code of ethics and taking
advantage of customers.
Mr. Meeks. You didn't break the code of ethics? Do you
realize that you have not only given--will you admit that not
only does your bank have a black eye, but that your bank, Wells
Fargo, has given the entire financial services industry a black
eye? Your responsibility.
You heard Mr. Sherman say--and I agree with him--that he
wants everybody to come in here. Why? There's only one reason
why. Your bank, you, CEO, chairman, basically for me, was on
top of what basically has been a criminal enterprise. Because
when I look at consistency, time after time after time and time
again, you have to get fines. Now, it must mean that you're
making a lot of money, because it's easier to pay the fine
because you know that nothing else is going to happen to you.
So you pay the fine, you get away, you make a lot of money.
Now, I'm upset. I'm from New York. I believe in financial
institutions. That's why I'm so mad. I believe that they make
our country better, until they rip us off. And they ripped us
off tremendously, taking advantage of customers and consumers
when we had the financial crisis. I've got individuals right
now who are on the street, on the street. They are not back in
their homes. They had these fraudulent mortgages. Nobody has
said, oh, I'm sorry that we gave you these fraudulent
mortgages, we're going to put you back in your home and we're
going to make sure that everything is okay. No one has done
that for them. You haven't volunteered to do that.
Will Wells Fargo put people back in their homes?
Mr. Stumpf. Congressman, if I could just respond for a
second, please. There is no question we didn't do everything
right and we've made mistakes. We're upping our game.
Mr. Meeks. So who should pay for it? If you didn't do
anything right, who is accountable for it?
Mr. Stumpf. We're going to make it right for every one of
our customers.
Mr. Meeks. Your VP made a $125 million bonus package. Your
institution is making over $22 billion a year. Who is paying
for it? Who is taking responsibility for it? Don't come tell me
you're sorry.
Mr. Stumpf. We're taking care of every one of our
customers who was impacted.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Wisconsin, Mr.
Duffy, chairman of our Oversight and Investigations
Subcommittee.
Mr. Duffy. Good morning, Mr. Stumpf. I want to tell you
that I'm a 20-year customer of Wells Fargo. I actually started
at Norwest.
Mr. Stumpf. Oh, thank you.
Mr. Duffy. My wife was with Wells Fargo. We got married
and it made it easy to join our accounts. I've had a pretty
good experience with your bank, that's why I've been there for
20 years. The people I've dealt with have treated me incredibly
well and that's why I'm there.
But what I'm hearing today is incredibly disturbing. And so
I just want to make sure you and I are on the same page. How do
you classify what Wells Fargo did with this potentially 2
million account holders?
Mr. Stumpf. Well, the 2 million account holders were--
accounts were about--the PwC looked at 93 million accounts. The
2 million are--
Mr. Duffy. No.
Mr. Stumpf. I'm sorry?
Mr. Duffy. Was this fraud? Was this just an HR problem?
Was this theft? How do you see this?
Mr. Stumpf. The 2 million accounts could not be ruled out
as--
Mr. Duffy. I'm asking about, well, how do you classify,
when you took $22 to $25 from whatever the number is, maybe
it's $1 million, maybe it's $2 million, how do you classify
that?
Mr. Stumpf. Well, I think it was dishonest, it broke our
code of ethics, and the people who are responsible--
Mr. Duffy. Was it theft?
Mr. Stumpf. Pardon me?
Mr. Duffy. Was it theft? Did you steal?
Mr. Stumpf. Our people did not do what was right.
Mr. Duffy. That's not my question. Did you steal? I want
to know if you and I are on the same page. Did Wells Fargo
employees steal from 1 million to 2 million of their customers?
Yes or no?
Mr. Stumpf. In some cases, they did.
Mr. Duffy. They did?
Mr. Stumpf. Yes.
Mr. Duffy. And so as Wells Fargo, back to 2011, is
stealing from their customers--and by the way, banking is based
on trust.
Mr. Stumpf. Correct.
Mr. Duffy. Right? So I don't care if it's 10 percent or 1
percent or 1/2 percent of the people that you do business with,
if you're stealing from them in 2011, a thousand people are
fired for stealing, and what do you do? You don't fix the
problem. And a thousand people are fired in 2012, and you don't
fix the problem. And in 2013, 1,200 people are fired, and we
still have a problem, and you're stealing from people. So how
do you--I guarantee you that any bank in my community, if they
were stealing from someone at the lower level, fired and fix
the problem on day one.
Mr. Stumpf. That's what we're trying to do. In fact--
Mr. Duffy. No, no, no, no. Don't tell me, ``trying to
do.'' We're 5 years on.
Mr. Stumpf. Let me just say something about how we
understood this problem. We didn't--when somebody would open an
unauthorized account, a savings account or a checking account,
it was not until--and when an account gets opened and not
funded--it's really important, please. When it's opened and not
funded, it gets auto-closed. We didn't believe, as we looked at
that, until sometime in 2015, that there could be the
possibility of a zero account that could affect a customer.
Mr. Duffy. You have got to be kidding me.
Mr. Stumpf. No, that was absolutely our analysis.
Mr. Duffy. You told us earlier the board members--you were
not saying that you knew, but board members knew in 2011. They
were looking at this. And if they're looking at 1,000 people
fired, that they don't know why they're being fired, that they
don't look in to say, what were these people doing that caused
them to be canned? And they look, they just pull the curtain
back a little bit and they go, man, whether you want to call it
defrauding our customers or stealing from our customers, Wells
Fargo has a big problem.
So that you tell me that it took 1 year, 2 years, 3 years,
to 2015? I don't buy it. What I think is Wells Fargo was making
a lot of money off what you were doing, and I think that you
were hoping that you wouldn't get caught. And so it's a risk of
doing business. You know what? We're willing to fire a few
people so I can come in here and say, weren't we great? We
fired a couple of people, we were trying to make it right, but
we kept the practice in play because we were making big
profits.
Did you end the practice? Is this over?
Mr. Stumpf. Yes. We're stopping all of our sales goals,
but let me just--
Mr. Duffy. How did you stop it? How could you stop it now,
but not in 2011 or 2012 or 2013 or 2014 or 2015?
Mr. Stumpf. Well, we should have done more earlier. We
should have done more earlier, but it's really important I make
this point, please. The $2.6 million of fees that were on
accounts, these 2 million accounts that we could not rule out,
it cost us $10 million to open those accounts and close them.
Forget even the cost of the team member and the dismissal. This
is a loser for us. It only helps when customers use products.
Mr. Duffy. Oh, it's a loser for you, I guarantee that.
Mr. Stumpf. It only helps when customers--I'd rather have
a customer have two products they use than four they don't.
We're totally aligned with customer--
Mr. Duffy. The concern that we have, Mr. Stumpf--and I
told you, I like Wells Fargo, I've been there 20 years--is that
you were turning a blind eye to your customers who were being
stolen from, people who couldn't afford $22, people who
couldn't afford $25, and that you didn't fix that problem. In
an institution that is based on trust with your customer, that
you didn't take this seriously, that you didn't remedy it, that
it has taken this long. Shame on Wells Fargo.
And I didn't get to my question, but I will hopefully at
one point hear you testify to how many CFPB employees were
embedded at Wells Fargo.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Massachusetts,
Mr. Capuano.
Mr. Capuano. Thank you, Mr. Chairman.
Thank you, Mr. Stumpf. I want to thank you particularly for
doing something here today that no other person has been able
to do in the last 4 years. You have brought true bipartisanship
to Congress. We're all together on this. We are not happy.
The last--oh, they already started. But the last few
minutes, they've been running a graphic in the back, and my
colleague had went through some of them. And I think it's
important to know what some of the other things you have done,
what they were. They weren't just fines. You screwed student
loan holders, credit unions, Fannie Mae, Freddie Mac, mortgage
holders, African-Americans, Hispanics, healthcare workers, on
and on and on.
And by the way, I understand this isn't material. Just 5
months ago you paid $1.2 billion in a fine. This is only 15
percent of that. Ah, who cares. We'll pretend to be sorry,
we'll fire some workers, and we'll get through this. You know
where I heard that before? The guys who ran Enron and the guys
who ran Arthur Andersen thought the same thing.
We're not your problem. We can't criminally prosecute you.
You can keep--hell, you're your own boss. You are the CEO and
the chairman. Hold yourself to accountability. Oh, my God,
you've been bad. Oh, no, you haven't. That's ridiculous. Your
problem is coming. It's not today. You think today is tough?
It's coming. When the prosecutors get ahold of you, you're
going to have a lot of fun. So I want to thank you for that.
I want to ask you--you have the graphic up here--do you
know this guy? See, I'm not a real good researcher. I'm not a
prosecutor. This is simple Internet research. That's all I'm
capable of doing. Google it. Wells Fargo. Boom, a whole bunch
of stuff shows up. This is Mr. Robert Holmes, who apparently
robbed your bank in Lancaster, Pennsylvania. He did not use a
weapon. He got caught. They got all the money back. He is in
jail as we speak on a $750,000 bail.
You, on the other hand, have run an enterprise that has a
culture of corruption. You encouraged subordinates to abuse
existing customers by opening fake bank accounts. You charged
those victims illegal fees, interest, and late charges, and
then you sent some of them to collection agencies because they
didn't pay them. Then you fired 5,300 workers, as if you care,
to cover everybody's tracks. In my opinion, you and your entire
leadership team are clearly and unequivocally guilty of at
least conspiracy to commit fraud, conspiracy to commit identity
theft, clearly racketeering, which is something a lot of my
friends know something about, and probably a dozen other
crimes.
One simple question: What the heck is the difference
between you and Mr. Holmes? Why shouldn't you be in jail? He
didn't use a gun. You got the money back. I understand that at
his arraignment, he said he was sorry. What's the difference?
Why shouldn't you be in jail right along with Mr. Holmes?
Mr. Stumpf. Congressman, I think that when you do
something unethical or dishonest, which I've tried to exercise
my duties as a leader in our senior leadership team to stop--
Mr. Capuano. You haven't done a very good job. You've had
16 violations in 5 years. That's a good job? This is a minor
fine. You've had a lot of--this is only the seventh largest
fine you've had. You've had six others that are a lot bigger.
That's a good job? I guess I forgot. You're the one judging
yourself, because you're also the chairman of the board. I
actually think I'm the greatest Congressman in the history of
the world. I should be Speaker, President, and maybe emperor of
the world. That's my judgment of myself. Sound good to you?
Mr. Stumpf. There is no question that we've done things
that we need to improve on and we've paid fines. And we're
trying to get better in every one of our businesses.
Mr. Capuano. So if Mr. Holmes pays a little fine, a few
bucks, based on the amount of money he stole and the victims he
had, you think he should be let out and have no criminal
record?
Mr. Stumpf. Again, being dishonest and breaking the law is
something very different.
Mr. Capuano. Oh, so it's not breaking the law stealing my
identity and opening an account that I didn't ask for.
Mr. Stumpf. And our culture is about not doing that. We
train for that not to happen.
Mr. Capuano. I don't know what kind of a culture. You have
16 violations and 5,300 employees that you say did it--
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from California, Mr.
Royce, chairman of the House Foreign Affairs Committee.
Mr. Royce. Thank you, Mr. Chairman.
Mr. Stumpf, the idea of a cross-selling target of at least
eight products clearly is part of a long-term practice at Wells
Fargo, going back at least to your predecessor, because in
1998, Fortune Magazine quotes doubling the average product
purchase to eight as your predecessor's ``current obsession.''
Morphing the goal to a mandate here seems to be a big part
of the problem. And I say mandate, because if people are fired
for not hitting that goal, it's a mandate. And that seems to be
at the center of a toxic sales culture that you've overseen.
But I'd ask you, was the goal of eight cross-sold products
something understood and embraced by management and by your
sales force?
Mr. Stumpf. It was a rallying cry to help work together.
The average consumer household has about 14 financial products.
Mr. Royce. Okay. I understand, but I'm going to ask you a
question. In retrospect, do you think that target contributed
in some way to the negative change in your sales culture?
Mr. Stumpf. We never had a target of eight. Again, it was
aspirational. We had team members who would work with customers
on need-based selling. And when they did that right, the
customer won and it was good for us.
Mr. Royce. Did you read the L.A. Times article when it
came out in 2013?
Mr. Stumpf. I'm sure I did. I can't recall it right now.
Mr. Royce. Was it something discussed at the board level?
Mr. Stumpf. We did discuss the L.A. Times article.
Mr. Royce. Well, here's my question: Did the information
in that article give you pause about reporting cross-selling
metrics or ratios in your annual reports, in your quarterly
reports, in the analyst conference calls that were clearly
inflated here by fake accounts generated by your sales force?
Mr. Stumpf. We love cross-selling because it helps
define--
Mr. Royce. Look, I understand your argument about that.
Here's the question: If you know fake accounts are going into
that ratio, why would you keep reporting that ratio? Because
I've got a copy here of your Investor Day. I've got a copy of
what is in your quarterlies. And, you turned to Mr. Duffy here
when he was asking the question, and you were saying, well, it
isn't that material in terms of our bottom line, in terms of
the fee income from these fake accounts.
But what you're reporting on your products per household is
a constant upswing quarter by quarter by quarter. It certainly
is material, in terms of the stock price. What you were doing
in constantly reporting these ever-increasing numbers was
driving your stock price up. And the point I'm making is, you
have this story in 2013 that shows how much of that was based
upon fraudulent behavior. That becomes material, right?
Mr. Stumpf. Well, let me just talk about that
specifically. The cross-sell ratio, even if you include all 2
million accounts in that--and we know we can't because we're
already finding out in credit card that 75 percent--or less
than 25 percent either did not order it or do not remember.
We've looked back for all the quarters going back. I can't
remember, it was 2010 or 2011, and it has a, I think, 1/200 of
one product impact. And it's absolutely immaterial.
Mr. Royce. Look, Mr. Stumpf, this is a California company.
You've got a lot of California customers. You've got people all
over the world dependent upon this company. You've got your
employees, and from what I understand, a thousand of them being
fired a year connected to this. I believe rebuilding the trust
and righting the wrongs is going to take a course of action
here that I've yet to see you set.
And through opening unauthorized accounts or playing the
shell game with a person's money, your employees and your
company negatively impacted the credit of many people in this
country. And I just want you to think for a minute about what
that meant, in terms of their ability maybe to qualify to get
that home or maybe to qualify to get that car or maybe, in
terms of the student loan, to send that son or daughter to
university. Not to mention, again, working Americans wrongfully
terminated by your company. For what? Refusing to break
financial laws. Refusing to break ethical laws. That's what we
have to come to grips with here. And this is, at the very
least, the result of actions over the last 5 years. That didn't
happen by accident.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Massachusetts,
Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman.
I have a unanimous consent request to enter into the record
a letter sent by Ranking Member Cummings, the gentleman from
Maryland, ranking member of the Oversight and Government Reform
Committee, to Mr. Stumpf requesting related documents by
October 13th.
Chairman Hensarling. Without objection, it is so ordered.
Mr. Lynch. Thank you, Mr. Chairman.
I would also like to ask the chairman to consider doing a
hearing at a later time with a number of the employees, both
whistleblowers who were fired and others who were fired for
retaliatory attempts to provide information on the fraudulent
conduct being conducted at Wells Fargo. I'm aware of at least
three U.S. Attorneys who have also issued subpoenas in this
case, so I'm hopeful that we may eventually get to the bottom
of this. And while the City of L.A., the City attorney there
and the CFPB and the OCC have done good work in this case, the
fines thus far are pathetic, really, totally inadequate to try
to bring Wells Fargo into compliance with the law.
And that is certainly reinforced by the way, Mr. Stumpf,
you have diminished the offenses that have gone on at your
bank. It is really proof positive that whatever the OCC has
done is not adequate to make you realize the level of your
offenses here. Again, 5,300 employees were fired. Up to 2
million fraudulent accounts. And this has gone on for at least
5 years.
I want to point out here--and Mr. Duffy has hit on this--
this is the banking industry. Actually, it exists based on
trust. And what your employees did, at least--well, as many as
565,000 fraudulent credit cards were secretly opened by your
employees using the Social Security numbers of your customers.
So they opened fake credit cards so they could charge them for
that. They assigned fictitious PIN numbers when the customer
didn't even know that was going on. They put PIN numbers. And
then they assigned email addresses so they could comply with it
and get the bonus so that the account was open. And these are
your customers.
Now, we've had credit card companies up here who have sent
credit cards to noncreditworthy borrowers and seniors who
didn't understand what they were getting, but in this case,
these are your customers. These are the people who became
victims because they did business with your bank. That is
unbelievable.
And I know that Mr. Meeks and Mr. Capuano before me have
made comparisons to criminal activity, but I do want to note
that under the Racketeer Influenced and Corrupt Organizations
Act (RICO), you've satisfied that. You've satisfied all the
elements of that. Two of the predicate offenses under RICO:
Number one is fraud, and there is no question about that. Mail
fraud, securities fraud. You've done it all. You've covered
basically every aspect of fraud in your bank over the last 5
years.
And secondly, in many cases, these employees, these
whistleblowers were intimidated or fired. You have an HR
employee here who says you had a system to retaliate in your
bank against whistleblowers. And that's another predicate
offense under RICO.
So let me ask you, as the CEO and chairman of the board,
you had a responsibility to file suspicious activity reports
(SARs).
Mr. Stumpf. Correct.
Mr. Lynch. Right. You have up to 2 million separate
accounts being opened, up to 565,000 bogus credit cards being
opened by your employees in secret against your customers. And
yet when we asked FinCEN, when we asked the Treasury Department
for the suspicious activity reports that you filed, they don't
match up. You're not in compliance.
Mr. Stumpf. Let me just say a couple of things. We filed--
we did everything that was necessary to abide by every
regulator and regulation issue--
Mr. Lynch. Are you saying you filed suspicious activity
reports on--
Mr. Stumpf. I can't say on that, because that's--
Mr. Lynch. Well, it's your responsibility. Let me read you
the law. I will close with this.
Mr. Stumpf. It's a responsibility, but that there is
actually a prohibition--I have to do what's right according to
the law.
Mr. Lynch. Let me just explain. All right. This is my
time. I'm claiming it back.
This is under the Bank Secrecy Act and Anti-Money
Laundering statute: ``The board of directors, acting through
senior management, is ultimately responsible for ensuring that
the bank maintains an effective Bank Secrecy Act/AML internal
control structure, including suspicious activity reporting and
monitoring.''
Mr. Stumpf. And we do that.
Mr. Lynch. That's your responsibility.
Mr. Stumpf. And we do that.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Oklahoma, Mr.
Lucas.
Mr. Lucas. Thank you, Mr. Chairman.
Mr. Stumpf, while my day job is that of a Congressman, I am
a farmer by trade and my university degree is in agricultural
economics. And looking at your resume, about the time you were
entering into the banking industry 30-some years ago, I can
remember taking a class on money and banking at Oklahoma State.
We had a professor who was very enthusiastic about the market
economy. And we discussed how the banking model we use now went
back essentially 500 years to Italy, and the concept that under
a market economy, bankers were the individuals who determined
what savings were worth and pooled those and, by the same
token, made risk determinations, figured out what the cost of
money should be, and allocated that out through loans. A
glowing example. And he would compare Western Europe at the
time, North America, much of the rest of the world, how
effective that was compared to the demand economy model of the
old communist countries at the time, China, Russia, all of
those sort of places. A very glowing discussion.
I don't know that I have a particular question for you
about what's gone on. I think between the other committee and
my colleagues here, that they've done an exceptional job of
getting the facts. And I suspect, as a number of my colleagues
have discussed quite straightforwardly, that this has legal
implications far and beyond the activities of this committee or
the other committee and the other body.
But I'd say, Mr. Chairman, the most challenging thing
you've done is, by the actions of your company, by your
management of the company, you've made it really hard for those
of us who are defenders of the market economy to continue to
maintain the system that has helped drive this successful
enterprise called the United States of America and the free
market system. That's probably the most tragic thing about
this.
Now, in those econ classes, he used to lecture us about the
concepts of enlightened self-interest. That's the nature of any
consumer. That's the nature of any businessperson. But then
there are the responsibilities that we used to talk about of
good corporate citizenship, about self-restraint, about not
pursuing greed.
I guess I'd just simply note to you, sir, whatever
ultimately legally comes out of this process--and clearly, a
number of my colleagues think something will--or whatever your
stockholders determine or your fellow board members, you've
just made it really hard for those of us who want to maintain
that concept of a market economy, who want to continue to make
sure that bankers, not some bureaucrat somewhere or the
arbitragers of capital, to effectively make this country move
forward.
I don't know how you correct this, but I suspect, sir, when
you interact with your peers within the industry, you're going
to have some challenges for a long time to come, because the
brush with which you will be painted will stroke all of them
too. And I suspect that's blatantly unfair and it's
unfortunate. But then, I'm just a farmer by trade, a
multigeneration debtor, working hard to service my debts every
year. But you have to think about that. You have to think about
that, what this episode has done to your industry and
ultimately to me and all of my fellow consumers out there. It's
just very unfortunate.
Mr. Stumpf. May I make a comment?
Mr. Lucas. Please.
Mr. Stumpf. Thank you. And we take this very seriously.
And I also come from a farm. I understand what it's like to be
on a small farm--or at least ours was small with a large
family. I know right from wrong. I know we have a lot of wrongs
to right here.
But I also want to tell you that Wells Fargo is a great
corporate citizen. We employ 268,000 wonderful team members
across the country. We have a culture based on ethics and doing
what's right. Not everyone does that. We've made mistakes.
We're one of the Nation's largest taxpayers. We're one of the
largest philanthropic organizations. We're involved in our
communities. And we have a lot of work to do. There is no
question about that.
But I stand with our--the people who are doing the right
thing, who honor our culture and our ethics. They are terrific
people and they are out there with our customers every day. And
we have work to do, I understand that.
Mr. Lucas. A disservice has been done to them.
With that, Mr. Chairman, I yield back.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Georgia, Mr.
Scott.
Mr. Scott. Yes, Mr. Stumpf, this is one of the most
outrageous acts that any banking executive has done in my
lifetime that I know of. How in the world could you in good
conscience set up these fraudulent accounts? What was going
through your mind when you were doing this?
Mr. Stumpf. Congressman, I didn't set up any of these
accounts. I--our team worked together at the business level,
then at the corporate level to find these--
Mr. Scott. Wait a minute, Mr. Stumpf.
Mr. Stumpf. We found these accounts and we found these
people and we said, that behavior is not acceptable.
Mr. Scott. Mr. Stumpf, you took advantage of unsuspecting
loyal customers. People in almost every single district that's
represented on this Financial Services Committee. You did that.
And you are the chief executive officer. You set the tone. And
you should be downright ashamed of yourself. And you should
apologize right now if you have any strain of respect for the
people of the United States, for the customers that you have
defrauded with this, for the rancid example that you are
setting. And not only that, for the damage that you yourself
with your action is being done to the entire banking industry.
Because you know what, all this cross-selling, now you have
caused an extraordinary spotlight to be focused on every bank
in this country. You have done that.
Mr. Stumpf. Congressman--
Mr. Scott. And you should apologize.
Mr. Stumpf. I have said in my opening testimony I am
sorry. I am accountable for this. I'm very sorry that we broke
trust with our customers, our communities, the American people.
I am deeply sorry for that. I'm going to do everything I can to
repair that.
Mr. Scott. And you know what hurts me so much? I'm one of
your customers. I have an account in Wells Fargo in the bank in
Atlanta, Georgia. I was on the phone with my district director
about this. And she has told me that in our constituent
services, when it comes to the mortgage assistance,
particularly with the bill that we passed here, the Hardest Hit
bill, and which we're offering and helping those people with
mortgages, to be able to pay up to 24 months of free mortgages,
and she says, we have no better cooperation from the staff of
banks than we have from Wells Fargo.
Mr. Stumpf. Thank you.
Mr. Scott. I'm your customer. And what's it doing?
Mr. Stumpf. Thank you.
Mr. Scott. But the example that you set is just absolutely
terrible.
Now, what I want to ask you is--because my number one
concern is my constituents in Georgia. Let me ask you, could
you tell us exactly how many customers of yours in my home
State of Georgia had fraudulent accounts set up in their name
without their consent? How many in Georgia?
Mr. Stumpf. I can get that for you if I have the right--
sorry. I know I'm using up your time here.
Mr. Scott. Well, maybe the chairman will give me a little
extra here. But it's important for us to know how many in--
Mr. Stumpf. In Georgia--
Mr. Scott. Yes, sir.
Mr. Stumpf. --we had 55,579 accounts that we could not
rule out as possible. Again, now, I just--
Mr. Scott. 55,000?
Mr. Stumpf. I need to--if you may let me, we're finding
out that on the credit card side, less than 25 percent did not
want those or did not remember.
But here's my commitment to you, Congressman: We're going
to work with every one of these accounts and make it right for
every customer. That is our commitment. I'm interested in
results, not in process here. Each account, we're going to take
care of it.
And I don't care whether there was--the biggest thing here
is secondary harm. I want to make sure that--I think it was
asked by another Congressman or Congresswoman about that issue.
We take this very seriously.
Mr. Scott. My time is scratching down. Here's the
fundamental question I want to ask you: Do you think what you
did was criminal?
Mr. Stumpf. I'm not a criminal attorney.
Mr. Scott. No, but do you think that?
Mr. Stumpf. I led the company with courage and with--
Mr. Scott. If another bank president had done this, or
chief executive officer, would not you say it's criminal?
Mr. Stumpf. I didn't break our code of ethics and I didn't
do anything dishonest.
Mr. Scott. Thank you, Mr. Chairman.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from New Mexico, Mr.
Pearce.
Mr. Pearce. Thank you, Mr. Chairman.
Thank you, sir. I appreciate you being here. I suspect it's
not all fun.
So you've talked about the 5,300 who were terminated. How
big a percent of the people in the company who were
terminated--surely out of 268,000 people, you'd get more than
5,300 terminated. So what percent of the terminations did that
actually represent?
Mr. Stumpf. I don't have that. I can work with our team
and see--
Mr. Pearce. Don't worry about it. That's okay.
Mr. Stumpf. I don't have that.
Mr. Pearce. So just looking at this from a 30,000-foot
viewpoint, and keep in mind I'm like Mr. Lucas, I grew up on a
small 5-acre farm. Dad was a sharecropper before he went to
work as a roustabout. We had a blue-collar company, just
working there in the oil fields of southeast New Mexico. So all
the numbers that get thrown around here are a little bit big.
But I can't fathom somewhere in the process that you had
5,300 people terminated and that doesn't come to your attention
as a CEO. You get calls on the ethics line saying, hey, we're
doing unethical stuff, in 2008, according to one of the other
people. According to your comments, people inside your company
are breaking the law, they're creating criminal acts, and that
doesn't come to your attention. You get $10.8 billion in
settlements, and that doesn't come to your attention.
So, if I'm sitting here thinking about this stuff just
coming in a clear just quiet room, board, seeing these things,
at some point somebody's going to say, Houston, we have a
problem. But it doesn't appear that anybody ever said, Houston,
we have a problem. The L.A. city attorney brings charges and
nobody on the board says, Houston, we got a problem. In your
assessment, looking back, what was it that would cause all
those things to go under the radar and not be recognized, not
be seen?
Mr. Stumpf. Thank you for that question. As we learned
more about this issue, we made investments. We made investments
in training, we reduced sales goals, we brought in a regulator.
Mr. Pearce. I understand. You've already--you've been
through that.
Mr. Stumpf. Okay.
Mr. Pearce. What kept you from seeing? What kept this from
rising to the--I'm sure that today, that you probably consider
the problem somewhat different than you did in 2011, 2012,
2013, 2014, 2015. Why did not you see the importance that you
would attribute to it today at any stage of the process?
Mr. Stumpf. Congressman, it's a good question. I've said
in my testimony. I've said--
Mr. Pearce. I read your testimony. I did not see the
answer. So since you appear not to want to see it, I'm sitting
here--and a balance scale, as a business manager, is always
there. Do we want to take that job cleaning out that well and
we can't clean it out and we get a bad reputation? Well, it's
worth a lot, maybe we will or maybe we won't.
Are we going to overlook the numbers of terminations? We're
getting the calls. Don't we really want to investigate? Stock
price is doing okay. My compensation is okay. You get the
balances there. Your compensation in that period of time is
approximately $200 million. That would cause one to say, I
think things are running okay. Yes, maybe we got that little
problem over there.
But another thing on the side of the scale that says I
don't want to look at this or I can't see $10 billion in
settlements, that it just doesn't come to my attention, 5,300
terminations doesn't come to my attention, because we have
260,000 employees. Obviously, we're doing things 99 percent
right. Forget the 2 million people that we've defrauded. Mostly
we're doing okay.
And so I see size and complexity being a great problem.
When you can't see 5,300 people being terminated, when you
can't see $10.8 billion in settlements, then you've got a
problem in size and complexity. And I would say that there is
no community banker in this country that would not have seen
people doing illegal acts.
And so maybe it was your stock compensation. Maybe it was
the size and complexity. But, sir, I think today, listening to
things that everyone has said, you have proved that you did not
offer leadership in this. You have kind of shirked around and
said the board can do anything it wants at any time. I, sir,
think you ought to submit a resignation, and your board cannot
hold off action on that.
Thank you. I yield back.
Mr. Stumpf. Mr. Chairman, may I just make a comment about
that?
Chairman Hensarling. The witness may comment.
Mr. Stumpf. We did take accountability. We did invest in
things to help reduce this, and we saw the numbers coming down.
Mr. Pearce. The problems continued, sir. The problems
continued right on through your actions. In 2011, you did this;
in 2013, you did that; and the problems continued.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Texas, Mr.
Green, ranking member of our Oversight and Investigations
Subcommittee.
Mr. Green. Thank you, Mr. Chairman. I thank the ranking
member as well. I'm grateful that you have given us a very
positive response and we are holding this hearing.
Mr. Chairman, with $5.6 billion in earnings in the second
quarter, Wells Fargo is not in this because of need. This is
about greed. It's about the same kind of greed that created
credit default swaps, that created negative amortization, that
created no-doc loans, that created prepayment penalties that
coincided with teaser rates, the same kind of greed called
exotic products that created the housing bubble. This greed has
caused this cross-selling to become the equivalent of an exotic
product, a product that has now created a cross-selling bubble
for Wells Fargo.
The cross-selling bubble exists because you were marketing
yourself as a company in a growth mode by virtue of the new
products you were having with your customers. You had customers
who were coming in and you were growing. This enticed
investors. It enticed consumers to buy your stocks. When your
stocks were bought, it benefited you and top-level executives,
to the detriment of lower-level entry employees. They got
fired, top-level executives get golden parachutes, and it's
business as usual.
Well, Mr. Chairman, this will not end by simply having some
lower-level employees go to jail. If top-level executives go
free and lower-level employees go to jail, it doesn't end it,
because there is no reason for this to cease and for top-level
employees to be more mindful of what's going on.
So we've reached a point now where the public expects to
see more than lower-level people punished: 5,300 working people
who, by what I seem to read, were encouraged to the point of
having themselves coerced to engage in this activity. These
were people who were trying to make a living, not trying to
make a big bonus and a big payday. These people deserve a fair
day, not just an exit from your company.
And what do I mean by a fair day? I think they deserve an
opportunity to be heard in terms of what happened at Wells
Fargo to cause them to do what they've done. I think that they
ought to be given an opportunity to come before Congress. They
ought to be able to explain.
And I would also add this: We have to find out how
pervasive this bubble is. We have to. We do have to bring
before the Oversight and Investigations Subcommittee other
CEOs, top-level executives, and let them tell us. And I think
that we have to start with you.
So tell me, please, sir, how commonplace is this cross-
selling in the banking industry?
Mr. Stumpf. Thank you, Congressman. For our company,
cross-sell is a good thing because it represents the depths
of--
Mr. Green. If you would, I'm going to have to intercede. I
have to intercede, because I'm asking you about the industry
now.
Mr. Stumpf. I have no idea.
Mr. Green. You have no idea as to how pervasive the
product is?
Mr. Stumpf. I don't know what other companies use.
Mr. Green. Well, are they using cross-selling? Are you
saying you have no belief or no idea that other companies are
cross-selling?
Mr. Stumpf. I do not have that.
Mr. Green. I must tell you, I cannot believe your answer.
You're telling me that you have no idea as to whether or not
they even engage in cross-selling?
Mr. Stumpf. I don't know their performance management.
Mr. Green. Well, do you know that they engage in it?
Mr. Stumpf. Every bank, every retailer out there has some
motivation, some way to make sure they recognize their people.
Mr. Green. Do they engage in cross-selling?
Mr. Stumpf. Well, I don't know. I don't know their
situations. I'm honestly--
Mr. Green. You don't talk to your colleagues? You don't
talk to other bankers? You have no idea as to whether they
engage in cross-selling?
Mr. Stumpf. I don't know what they use.
Mr. Green. Well, listen, I thank you for your answer--let
me finish.
Because, Mr. Chairman, this is the evidence that we need to
bring the others in. We have to ask them what they're doing,
given that this gentleman refuses to give us what I believe to
be a correct answer.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Florida, Mr.
Posey.
Mr. Posey. Thank you, Mr. Chairman.
Mr. Stumpf, members of this committee have already
expressed the outrage that we all feel, that this atrocity was
able to happen. It's absolutely deplorable that your customers
were subject to this practice. And I'm sure the fine that Wells
Fargo will pay will be insufficient to comfort the customers or
adequately compensate them.
At best, at the very best, you and our Federal regulators
were asleep at the switch. At worst, it's almost, if not, a
criminal enterprise. My biggest concern--and I think it's the
biggest concern of every Member on both sides of the aisle
here--is that we need to ensure that it doesn't ever happen
again. That means we have a shared interest in understanding
what caused and what perpetrated the unprecedented level of
fraud. And I have just a couple of questions that I think will
help drive us in that direction to understand it.
First, Mr. Stumpf, I understand that Wells Fargo sets goals
for new banking products each employee was expected to sell
daily. Is that correct?
Mr. Stumpf. I don't believe that's the case. I know, as
part of our reward system and our performance management, that
products were part of their performance management, along with
customer service, customer loyalty, doing things right. But,
again, as of this Friday, we're getting rid of those goals.
Mr. Posey. Okay. I've read a range of reports that put the
sales goals somewhere between eight to five new sales each day,
compared to the reported industry standard of three to five per
day.
Briefly, I was going to ask you if you could give us an
idea of how the goals were determined?
Mr. Stumpf. Within our business. I wasn't part of that
process. And I don't know if that's an--you made reference to
an industry standard and what ours is. I wouldn't have
specific--
Mr. Posey. Okay.
Mr. Stumpf. I can try to get back to you on that.
Mr. Posey. Are you aware if the expected targets vary
between bank branches of different size, location, or
constituencies?
Mr. Stumpf. I believe that is the case, yes.
Mr. Posey. You think they did.
Mr. Stumpf. I believe that was--I don't know when that was
introduced, but I believe in the past, at locations that would
have more activity, we'd either have more bankers or more--
Mr. Posey. Thank you--thank you for the straight answer.
Mr. Stumpf. Okay.
Mr. Posey. As a followup, did the bonuses associated with
those goals vary between those branches or did Wells Fargo use
a single, uniform system?
Mr. Stumpf. Again, that's a level of detail I don't know.
I can try to get back to you on that.
Mr. Posey. Okay.
Now, so far in the investigation of bad actors, have you
found any correlation between the likelihood of employees
committing fraud and the demographic or socioeconomic
characteristics of the people being served?
Mr. Stumpf. Yes, first of all, I am--and I don't know--I'm
not trying to be careful on words here. I don't know what
``fraud'' exactly--I know what's right and I know what's wrong,
and I don't know what the intent of all these people were.
But, to answer your question specifically, there was no,
that I understand, racial or ethnicity difference other than
what the communities are, because we try to have--
Mr. Posey. All right. Okay.
Mr. Stumpf. --people in our banks who represent the
communities.
Mr. Posey. All right. So we'll take racial and ethnicity
off the table here.
As someone who also represents a district heavily populated
by seniors, I'm worried that Wells Fargo may have intentionally
preyed upon those they saw as vulnerable. Do you believe
seniors were purposefully targeted as a result of employees
stretching to meet their sales goals?
Mr. Stumpf. In fact, we've looked at--because we actually
capture date of birth, so we could tell that. And for deposit
accounts, no, there was no disproportionate--it did not--in
fact, it was younger people, not seniors, if there was any
emphasis at all or any--
Mr. Posey. Okay.
Mr. Stumpf. Yes.
Mr. Posey. To be clear, I don't think sales goals are
inherently evil. Anyone who has owned a business understands
the need to incentivize employees to succeed and reward their
successes. Unfortunately, your company forgot the most
important part of any business, more important than sky-high
stock prices, year-end bonuses, or fat retirements: It's the
people that you serve.
I'm increasingly concerned that this misguided idea of
success that puts actual customers in the category of least
concern is perpetrated by more than just Wells Fargo, by the
way. To the best of your knowledge, was this practice of
creating fake accounts exclusive to Wells Fargo?
Mr. Stumpf. Again, I don't know. And I only know what I
know about our company.
But I'd also like to make--if I just, in your few seconds
left. The investment--the reason people buy Wells Fargo and
invest in us is our--is a whole lot more. It's about our broad
product model. It's about our--
Mr. Posey. Let me ask just one quick--
Mr. Stumpf. --distribution in the United States, about
our--
Mr. Posey. --question with my time. Can you tell me any
action the CFPB has taken that would stop something like this
from happening again?
Chairman Hensarling. Brief answer from the witness.
Mr. Stumpf. We've worked with the CFPB. We have made an
agreement with them, and we're going to continue to work with
them on this issue.
Mr. Posey. But any action that they've taken that would
stop it from happening again?
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Missouri, Mr.
Cleaver, ranking member of our Housing and Insurance
Subcommittee.
Mr. Cleaver. Thank you, Mr. Chairman.
Mr. Stumpf, thank you for being here. I know you're not--
this is not one of your better days, but hopefully you
understand--I have a plane to catch. I may not finish my time.
And I dare not get on a plane and go back to Kansas City and
conduct myself in a way that everything is fine and we'll all
join hands and sing ``Kumbaya'' and fix the problem.
One of the reasons that everybody in this place is upset is
that each of us represents about 840,000 people, and probably
every one of them is angry, especially those who had problems
getting loans and people who were ripped off during the crisis
from 2008 and 2009. And so I think many of them think that they
had a preview of this--Gordon Gekko: Greed is good, greed is
right, greed works--from the movie, ``Wall Street.'' And I
think that's one of the problems we have here.
Now, you've already been ``Warren'd'' before I had my
opportunity, so I'm not going to ``Warren'' you, but I do need
to ask you a couple of questions, maybe just one.
There were $2.6 million in overdraft charges that incurred
on linked accounts and late fees. There were thousands of
consumers on fire, figuratively, and your bank had tubs of
water, but the people there decided to drink it and let the
people burn, including the people who had gotten fired.
My question is, how far up the chain have you been able to
determine that this scheme, this fraud occurred?
Mr. Stumpf. We know that 5,300 people broke our trust,
were not honest. And we know that we are going to do a complete
review of anybody who would have been part of this. And if they
were dishonest and broke our code of ethics and took advantage
of our customers, they will be held accountable. And we've
returned that money with interest with an apology.
Mr. Cleaver. Yes, I know, but I'm trying to find out how
far up the chain have you determined, thus far, that the scheme
went.
Mr. Stumpf. Well, first of all, it was--most of our people
do it right, and this was just the opposite of what we train
for, just the opposite of what we talked about. So when--
Mr. Cleaver. I think--
Mr. Stumpf. --they say it's a scheme,--again, it's 1
percent of our people. And I know that's a lot of people, given
the size of our company, but--and we'll do a full review, and
we're going to do a review of that.
Mr. Cleaver. God bless you, but what I'm trying to find
out is how far up the chain.
Mr. Stumpf. We're not going to let the chain impede. The
board's going to do a review of the company and make sure
everybody is held accountable.
Mr. Cleaver. Okay, so--okay. Thank you. I appreciate that.
Mr. Stumpf. Thank you.
Mr. Cleaver. Now, how far up the chain?
Mr. Stumpf. So far, of the people that we have found, it
is branch managers, their manager in some cases, and a manager
of a manager. So that's the work we've done so far.
Mr. Cleaver. So the manager of a manager would be what, a
vice president?
Mr. Stumpf. Yes, I don't know exactly the title, but I
think it was called an area president.
Mr. Cleaver. Area?
Mr. Stumpf. Yes, I think it was area president.
Mr. Cleaver. Okay. So have any of those folks been fired?
Mr. Stumpf. Pardon me?
Mr. Cleaver. Have any of them been fired?
Mr. Stumpf. Yes
Mr. Cleaver. All the vice presidents?
Mr. Stumpf. Well, I don't know--again, I don't know if
this person was a vice president. I don't know what the title
was. But I know it was banker, then branch manager, manager of
the branch managers--I think they're called district--and then
an area manager.
Mr. Cleaver. So, no matter how high it goes, they're going
to be fired.
Mr. Stumpf. They're going to be held accountable. I can't
say what--
Mr. Cleaver. Okay.
Mr. Stumpf. I don't want to prejudge the--
Mr. Cleaver. No, I understand. I understand. So, no matter
how far it goes up, though, they're going to be fired.
Mr. Stumpf. As far as they go up, they're going to be held
accountable, whatever that means.
Chairman Hensarling. The time of the gentleman has
expired.
Mr. Cleaver. That's why everybody's beating you up.
Mr. Stumpf. Pardon me?
Chairman Hensarling. The Chair now recognizes the
gentleman from Pennsylvania, Mr. Fitzpatrick.
Mr. Fitzpatrick. I thank the chairman.
Mr. Stumpf, I want to follow up on Mr. Cleaver's questions.
First of all, I represent a district outside of
Philadelphia, Pennsylvania. And I, like probably most of my
colleagues here, have received letters from your customers,
from our constituents, from former employees of the bank. And
they have a lot of questions of their own, which we have to
help them try to answer.
First, I want to ask sort of a foundational question. This
is a question that you've been asked many times already today,
and last week in the Senate, about when you first heard of this
situation, this so-called situation with your customer
accounts. And you've given us approximate dates, which we
appreciate.
But, first and foundationally, if you could tell the
committee, tell the American people, when you first heard about
the problem, where were you? Who told you? What did they say to
you? What did you do about it? The first moment.
Mr. Stumpf. Okay. So I'll answer your question, and thank
you for that.
I've always known, as I think most Americans know, that not
everybody will do everything right every day. And we have
100,000 different people in this retail banking business. So we
knew and I knew that this had to be managed, and it was being
managed in the business.
Sometime later in 2013, before the L.A. Times story came
out--because that did not surprise me, because I had heard that
we were seeing an acceleration of this activity in a certain
marketplace. And I can't recall if my chief legal counsel told
me. I can't remember if it was in a meeting with the business
leader at the time or compliance. And that's when I first knew
that this was becoming a bigger issue.
So resources were brought in, to bring corporate resources
in, to assist the business line. And then we spent--or the
business and the corporate group, called CORE, spent time
working on that issue, and we saw the issue come down.
It was not until 2015--and we should've learned earlier. We
should have--we did--
Mr. Fitzpatrick. Mr. Stumpf, you're not answering the
question.
Mr. Stumpf. I'm trying--
Mr. Fitzpatrick. When you first heard, where were you, who
told you, and what did you do about it? When you first heard.
Mr. Stumpf. Again, I don't remember where I was sitting,
what I was doing, where I--but I recall hearing it sometime in
the summer/fall timeframe of 2013. I can't--I don't remember
the exact minute or the person.
Mr. Fitzpatrick. Mr. Stumpf, there have been so many
people who've been hurt by what we know right now, not just
your customers you're going to lose--
Mr. Stumpf. Correct.
Mr. Fitzpatrick. --many customers. You'll never get them
back. There have been lower-level and mid-level employees
who've been injured. You mentioned earlier in your testimony,
268,000 people went to work today--
Mr. Stumpf. Correct.
Mr. Fitzpatrick. --in Wells Fargo to do the right thing,
and, for the most part, we all believe that. You also mentioned
there were some 5,000 employees who lost their positions.
As employers, we're responsible, when you bring somebody
young into an organization, somebody perhaps right out of high
school or right out of college--
Mr. Stumpf. Correct.
Mr. Fitzpatrick. --we have special responsibility to that
employee to train them, to make sure that they're being trained
in the ways of ethics in banking. How many of those lower-level
employees who were part of the 5,500 who lost their jobs?
Mr. Stumpf. Yes, the vast majority--and I don't have exact
numbers, but I believe about 7 percent or so would've been at
the teller population, and the remainder, the other 93 percent
were someplace--and that's my understanding--were banker,
senior banker, branch manager, and so forth.
And, incidentally, we do give 2 weeks of training for all
of our team members before they go out into the--because you're
right, we have a special responsibility to help them understand
our culture. They sign a code of ethics, and we--
Mr. Fitzpatrick. Are they being told in those employee
trainings about the so-called goals, quotas?
Mr. Stumpf. They're told about all the responsibility of
their job, including--I've done townhalls, which I do every
quarter. I did one in Philadelphia just a couple of months ago.
And I've been talking in every one of those--generally, I talk
about doing the right thing, putting customers first, ethics.
Mr. Fitzpatrick. Mr. Stumpf, there have been reports from
multiple whistleblowers from the bank that they provided
information up the chain of command and were ignored. As a
matter of fact, some of them were fired. Are you familiar with
those cases?
Mr. Stumpf. I have heard about those. Those are
regrettable. We have a nonretaliation policy on whistleblowers.
Mr. Fitzpatrick. Being fired in the Federal Government for
being a whistleblower is a very serious matter. Hopefully,
you're taking it as seriously as anybody else would?
Mr. Stumpf. We're taking that very seriously. We have a
nonretaliation policy.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentlelady from Wisconsin, Ms.
Moore, ranking member of our Monetary Policy and Trade
Subcommittee.
Ms. Moore. Thank you so much, Mr. Chairman.
And I want to welcome our witness here today. I've learned
so much here. And I know when you go to the Wells Fargo
website, there your picture is, John G. Stumpf, the vision and
values of Wells Fargo. And it features you.
You said that you started in Wells Fargo in 1981?
Mr. Stumpf. 1982.
Ms. Moore. In 1982. Okay. My math is not that good. And
you succeeded Mr. Kovacevich. And they had already started a--
so you were trained, and you knew what the culture of this
Norwest company--I guess there was a merger of Wells Fargo and
Norwest.
And so did you receive training or do you know if the
employees received training on this Going for Great program
that we've talked about here today, where most of your
customers only had five accounts in your bank and that there
was an effort to get at least eight, sort of, accounts for the
customers? Was that part of the culture?
Mr. Stumpf. Yes, thank you for the question.
As I mentioned before, that was an aspirational goal. Most
of our customers have--most households have 14--
Ms. Moore. All right. Okay. Because I don't have much
time.
Mr. Stumpf. Okay.
Ms. Moore. And so, as your predecessor noted, there is
just abundant growth potential in the Wells Fargo customer base
and that one of the sayings around that place was, ``Hey, we
inspect what we expect.'' Were there constant monitorings to
see if people were meeting these goals? That was--it said, ``We
inspect what we expect.'' What does that statement mean?
Mr. Stumpf. Yes, that statement means that we expect our
people to live according to our vision and our values, our
ethics, and our culture. And if they don't--
Ms. Moore. Well, good. I am so happy. I'm going to
congratulate you on draining the swamp of these 5,300 low-level
employees because they almost brought down one of the greatest
companies that our country has ever known. I remember Wells
Fargo in the old wagon train days. So I'm happy that you got
rid of those employees. And I am sorry for your loss of your
$41 million, and I'm sorry for the loss of the investors whose
stock dropped.
But I am wondering what the relief is for one of my
constituents. I have her letter, and I ask unanimous consent to
enter it into the record. She worked at Wells Fargo--
Mr. Fitzpatrick [presiding]. Without objection, it is so
ordered.
Ms. Moore. Okay. Thank you.
She started making $13 an hour, and she ended making $15 an
hour. And she was one of those whistleblowers who complained to
the manager, and then they changed her performance numbers and
pushed her out. And so she's a person who kind of lost her job
and other stuff that happens to you when you make $13 an hour--
$15 an hour, I'm sorry, and you're pushed out by people because
you don't want to--because you don't fit in with the
expectations and the culture.
What is the remedy? Is there a fund for these employees,
the good ones, not these 5,300, what was it, $12-an-hour, $13-
an-hour employees? What is the remedy for my constituent at
Wells Fargo? I know--
Mr. Stumpf. We want to know about everyone, and we're
going to review their files for anyone who had anything to do--
if they were--
Ms. Moore. It says she has a case with the Wisconsin Equal
Rights Division. How come she couldn't just come to you and
tell you--
Mr. Stumpf. And we have people that she can talk to.
Ms. Moore. No. The people she talked to fired her.
Mr. Stumpf. We have corporate resources here. If you could
give me that name, Congresswoman, I'll let our people know--
Ms. Moore. Okay. I want to ask a question. I have 49
seconds.
I was very disturbed to hear about--you said that the
numbers were just not large enough to rise to the level of
being material for security law purposes. I guess I don't
really understand that.
Would you, as an investor, invest in, sort of, the Bernie
Madoff-type enterprise, it just seems like it was, these huge
dividends? Would you make this kind of investment yourself?
Mr. Stumpf. This is not any--this is a quality company
that made some mistakes, but our investment thesis is all about
our capital, our growth, our--
Ms. Moore. I have 9 seconds left, and I just want to ask
this one question.
You have stated previously that you think the Dodd-Frank
Act overregulates. Do you still believe that?
Mr. Stumpf. I have never said that.
Ms. Moore. Oh, really?
Mr. Stumpf. I don't recall saying that
Chairman Hensarling. The time of the gentlelady has
expired.
Ms. Moore. Thank you so much, Mr. Chairman.
Chairman Hensarling. The Chair now recognizes the
gentleman from Indiana, Mr. Stutzman.
Mr. Stutzman. Thank you, Mr. Chairman.
And, Mr. Stumpf, I got my first loan from Norwest bank for
a motorcycle when I was 20 years old, and I've been a happy
customer of Wells Fargo for over 20 years.
Mr. Stumpf. Thank you.
Mr. Stutzman. And I have been frustrated with Wells Fargo
as of late because of the new website. And I've voiced that.
And I think part of this--I think you need to do something
about it, because the transparency in the website right now, I
can't find some of my accounts.
And I think that there needs to be, at this point, a time
where you can give customers confidence, through the website,
to make sure that every account can be seen. Because I got
notices all of a sudden of accounts that I didn't recognize
because I didn't see them on a daily basis. I found them after
I called Wells Fargo and talked to them.
But what my question is to you--you know, and I--your story
is remarkable. You came from a dairy farm, I believe, in
Minnesota.
Mr. Stumpf. Correct.
Mr. Stutzman. And if you'd have taken a different choice--
I grew up on a dairy farm, still part of our family farming
operation. I'm curious to know what you would do today if you'd
have taken a different path, a dairy farmer in Minnesota, and
you have been trying to buy land and you were trying to buy
some more cows. And you realize that your credit score,
something is wrong with it, and you have not been able to get
your credit score. But all of a sudden you find out that maybe
your credit score was dinged because your bank was opening
accounts.
When accounts are opened, it dings your credit score,
correct?
Mr. Stumpf. That is correct.
Mr. Stutzman. That's right. So 2 million people
potentially had their credit score dinged because someone else
was opening accounts in their name. Is that correct?
Mr. Stumpf. That is not correct. There were about 565,000
consumer credit cards, which we already now have contacted
20,000 of those, and less than 25 percent saying--and I don't
want to minimize the numbers. These are still big numbers. Even
one is too many. But we're going to go back, and my instruction
is make it right for every one of those customers.
Mr. Stutzman. Here's what I was surprised to just watch a
little bit ago. When Mr. Cleaver was asking you what was the
highest-level officer at Wells Fargo to be fired and you didn't
really know. You kind of said area manager--
Mr. Stumpf. I know that--excuse me. I know the title, I
know the functional title. I don't know if that person is a
vice president, a senior vice president. I just don't know
that. I do know that it's a branch manager's manager's manager.
And we're also not done with our investigation.
Mr. Stutzman. I understand. But this broke for the public
within the past month. You apparently knew about it, what, in
2012? In 2013?
Mr. Stumpf. We knew that not everyone does it right. It
was sometime in 2015 we did our PwC study, and those results
came in early in 2016.
Mr. Stutzman. But you're the CEO. When 939 employees are
fired for improper sales in 2011, in 2012 another 1,000, all
you have to do is stand up in front of your company--and I know
it's a large company--and say, ``This is going to stop,'' and
it should have--it should be stopping.
I'm curious to hear from employees who were fired what
their experience was, and I hope we do a hearing with some of
those.
But let me ask you this. Wells Fargo is a huge company. Is
it too big to manage?
Mr. Stumpf. No, it is not. This was a focus problem. And
we do a lot of areas really, really well, like model risk and
market risk and capital liquidity. We know we have work to do
in operational and compliance risk. We should have invested
more.
Today I've told our folks, no stone unturned, no dollar
unspent, get this right. And we're getting rid of sales goals.
Mr. Stutzman. I know you said that today, but where was
the outrage from you a couple of years ago when you first heard
about it?
Mr. Stumpf. We were--
Mr. Stutzman. There's outrage on this committee, and
rightly so. I'm outraged about it. But I don't sense the same
outrage from you, when you have--when we're seeing your--the
lady here, her name is Ms. Tolstedt, I believe, she's walking
away with millions of dollars. The American people and your
customers are going to be very upset when they see exactly what
happens here.
Final question. And I hope that you will--I didn't hear the
question from this committee, but will you get the number to
this committee of CFPB regulators who were embedded at Wells
Fargo bank?
Mr. Stumpf. I can talk to our team, and we'll be as
cooperative as we can. I don't know whether that's covered
under confidential supervisory information, but I'll be as
helpful as I can be on that issue.
Mr. Stutzman. Please do that. I think that, not only have
you and Wells Fargo let customers down, but so has the CFPB,
and people across this country are mad at both.
Mr. Stumpf. Thank you.
Mr. Stutzman. Thank you, Mr. Chairman. I yield back.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Minnesota, Mr.
Ellison.
Mr. Ellison. Mr. Chairman, I ask for unanimous consent to
enter into the record a report entitled, ``Banking on the Hard
Sell: Low Wages and Aggressive Sales Metrics Put Bank Workers
and Customers at Risk.''
Chairman Hensarling. Without objection, it is so ordered.
Mr. Ellison. I would also like to enter into the record an
op-ed I wrote in The Daily Beast just the other day entitled,
``John Stumpf's Wells Fargo Racket Shows Why Bank Workers Need
a Union.''
Chairman Hensarling. Without objection, it is so ordered.
Mr. Ellison. And I would also just like to note for my
colleagues, the Progressive Caucus held a June 10th briefing,
listening to the workers that we've been talking about today.
We'd be happy to do another one. But on June 10th, we had
workers come in and testify to the very thing that we've been
talking about today, which is these high-pressure sales
techniques.
Mr. Stumpf, if you're a worker at Wells Fargo, you are
expected to seek out and reach sales goals. You mentioned that,
right?
Mr. Stumpf. We had sales goals and--
Mr. Ellison. That's a yes or no, sir.
Mr. Stumpf. Yes--
Mr. Ellison. Yes or no, sir, because I don't have a lot of
time. I'm not trying to be unkind to you, but I'm not going to
let you waste my time. Okay, so yes or no?
Mr. Stumpf. Yes, we had sales goals.
Mr. Ellison. Okay. Thank you.
So could you tell me, do you all have something known as
prospecting calls that were expected for bankers to make?
Mr. Stumpf. I don't know that level of detail.
Mr. Ellison. Okay, so you don't know whether there were
prospecting calls?
Mr. Stumpf. I don't know.
Mr. Ellison. Would you be surprised--do you deny that
there were prospecting calls?
Mr. Stumpf. I do not know that level of detail in our
retail bank.
Mr. Ellison. Were you aware that each banker was expected
to make at least 100 prospecting calls a day? Are you aware of
that?
Mr. Stumpf. That--I'd had--that's the first time I've ever
heard that.
Mr. Ellison. Mr. CEO/Chairman, are you aware that there
were weekly meetings held by--no, morning huddles to talk about
these sales goals? Are you aware of that?
Mr. Stumpf. I realize--I know that some--
Mr. Ellison. You've got to answer yes or no, sir.
Mr. Stumpf. But it's yes with an explanation.
Mr. Ellison. Well, okay. So morning huddles or not, yes or
no, did they occur?
Mr. Stumpf. Yes, with an explanation.
Mr. Ellison. All right. At these morning huddles, were
there questions asked of workers, how are they going to sell
more credit cards, and were they given goals for specifically
selling a number of credit cards?
Mr. Stumpf. I don't know that everyone holds--I have to
give you an explanation, sir.
Mr. Ellison. Home equity loans, were they given goals in--
Mr. Stumpf. I don't know that. I don't know that every
branch held a morning huddle. I know our team works together.
Mr. Ellison. Was there publishing of charts on who sold
how many products in your bank?
Mr. Stumpf. That's a level I do not know that detail.
Mr. Ellison. Was there publishing of charts on who did not
make their sales goals?
Mr. Stumpf. Again, I don't have that level of detail.
Mr. Ellison. Workers say that there were.
Mr. Stumpf. Okay.
Mr. Ellison. Now, if a worker did not reach their sales
goals, were they put on initial written warnings?
Mr. Stumpf. I don't know the process--
Mr. Ellison. If they did not--
Mr. Stumpf. And we got rid of sales goals now.
Mr. Ellison. Excuse me. If they did not--if workers did
not meet second sales goals again, were they given second
warnings?
Mr. Stumpf. I don't know that level of detail.
Mr. Ellison. Okay. If they were not given second warnings,
were they written up, given written admonishments for not
making sales goals?
Mr. Stumpf. Congressman, you're asking a question I can't
answer.
Mr. Ellison. Okay. So, yes, you're the CEO and you don't
know this.
And were they given performance improvement plans if they
did not make sales goals?
Mr. Stumpf. Congressman, I don't know that level of
detail.
Mr. Ellison. All right.
And how do you generate these lists for workers to have to
make calls? How were the lists generated?
Mr. Stumpf. Congressman, I don't know if there were lists.
I just don't know that level of detail.
Mr. Ellison. Okay. So you're the CEO, and you don't know
if there were sales--if there were prospecting lists that each
worker was made to make cold calls on.
Mr. Stumpf. I don't know that level of detail,
Congressman.
Mr. Ellison. Okay.
And if sales weren't important, why were workers given
credit card and home equity loan goals to meet?
Mr. Stumpf. Yes, I don't know what their goals were. We
want to deepen--
Mr. Ellison. Why did you--
Mr. Stumpf. --relationships.
Mr. Ellison. Why were workers encouraged to open numerous
accounts for customers?
Mr. Stumpf. Our team members are encouraged to sit down
with a customer, talk about their financial dreams, and help
provide the right products and services.
Mr. Ellison. So if a worker got a person to open up an
account, isn't it true that account--let's say a debit
account--that there has to be a certain minimum balance in that
account and there is a fee to hold that account if there's not
the minimum balance met? Am I right about that?
Mr. Stumpf. I don't believe you are right about that,
Congressman.
Mr. Ellison. If there's an account--
Mr. Stumpf. I don't believe that's correct.
Mr. Ellison. If there's an account, does there have to be
a certain number of uses of that debit account per month?
Mr. Stumpf. I believe that's one way to avoid--to not have
a fee.
Mr. Ellison. And if it's not met, is there a fee
associated with that?
Mr. Stumpf. I believe there's a minimum balance--
Mr. Ellison. What is that fee? What is the minimum balance
fee?
Mr. Stumpf. I don't know what those numbers are.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from South Carolina,
Mr. Mulvaney.
Mr. Mulvaney. Thank you, Mr. Chairman.
I can't tell you how disappointed I am to even have to be
here today. As one of the many members of this committee who
spends every single day in here defending the banking system,
defending capitalism, and defending free markets, to have to
sit here and watch you essentially validate everything that the
other side has said about you and your business and your
industry, I don't know, for the last three or four generations
is extraordinarily disappointing to me. The damage that you
have done to the market, to your industry, far exceed the
damage that you've done to your own business. But, again,
there's nothing I can do about that.
I want to ask you, I think, just one question. I know a
little bit about business, not nearly as much as you do. What
little I do know I didn't learn from college or business
school, I learned from my dad, who was actually raised very
similar to you. He was from Minnesota, born to a lower-middle-
class family, went to Winona University.
He was a little bit older than you, but not much. And I
remember him telling me one time when I was first getting into
business, he said, you know what, you can learn a lot about an
enterprise, about an organization by looking at the leader, and
that the organization will take on the personality of the
leader or the owner or the person in charge.
And if you walk into somebody's--you walk into a lobby and
you're received nicely by the young man who's sitting there
answering phones, it's probably a really good indication that
the lady who owns the place is a really good person.
Conversely, if you walk in and you get treated like crap and
with disdain, it probably says a lot about the people at the
top of the chain.
I happen to think that the folks who work with me in my
office reflect that. You come into my office, you get treated
well, because that's important to me. The place that you ran,
Mr. Stumpf--and I don't know that much about Wells. I knew a
little bit about Wachovia and Wells--First Union because of
where I grew up. You all were rotten.
We've heard some stories today that everybody's heard
about. I'm sitting here looking at the story from 2009 about
the lawsuit that got filed. It says: Wells Fargo, Ms. Jacobson
said in an interview--this is The New York Times--saw the Black
community as fertile ground for subprime mortgages, as working-
class Blacks were hungry to be part of the Nation's home-owning
mania. Loan officers, she said in an affidavit, stated that
employees referred to Blacks as ``mud people'' and to subprime
lending as ``ghetto loans''--I can't tell you how hard it is
for me to even say that--that you all targeted Black churches.
I'm not going to defend that. That doesn't even deserve a
defense.
I'm going to ask you one question. Does this organization
reflect you?
Mr. Stumpf. Well, I--
Mr. Mulvaney. You're in charge.
Mr. Stumpf. I am deeply sorry, and I've read that article
you just said, and that has no place in our culture, no place
in what we've done. And we are today the largest lender to low-
and moderate-income people on housing. We make more loans to
African-Americans, Latinos, persons of color, and we're proud
of that.
And that place--and that kind of language and that kind of
behavior is not who I am. I've learned my life lessons, also,
from my parents. My dad is 94, and he's still a wonderful guy
and is still a big influence on our life, and so is my mother.
And I try to lead with courage and conviction.
Our company is based on those values of ethics, of doing
what's right. And the company, of course we've made mistakes.
Not everybody lives up to our vision and values. But the vision
and values our 268,000 people aspire to and do every day is
consistent with what I want to live my life and what our
culture is of our company.
Mr. Mulvaney. Thank you, Mr. Stumpf. I appreciate that.
For the minute I have left, I want to say something to my
Democrat colleague, who I know will see this and, believe me,
if the roles were reversed, I might see this as an opportunity
to try to push a political initiative, a political agenda, to
bang the drums for more heavy regulation. Everything that we're
talking about here today, including what I just read, which I
won't read again, happened since the CFPB and Dodd-Frank. It
happened after we supposedly fixed all of this with regulation.
And maybe, I would suggest this, you can't fully regulate
bad actors. I'm not here in a position to say if Mr. Stumpf is
a bad person or not. That's not up to me. I'm trying not to be
in the position of judging other people. That's for his board.
I know how I would vote if I were on the board. In fact, he
wouldn't even be here if I were on the board of that company.
But you're never going to be able to fully regulate bad actors.
And I hope we look at this with a certain level-headedness as
we move forward.
Thank you.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Colorado, Mr.
Perlmutter.
Mr. Perlmutter. First, Mr. Chairman, I ask unanimous
consent to introduce into the record the community banking
reports from May 24, 2016, from Wells Fargo--
Chairman Hensarling. Without objection, it is so ordered.
Mr. Perlmutter. --and the report from May 20, 2014.
Chairman Hensarling. Without objection, it is so ordered.
Mr. Perlmutter. Mr. Stumpf, about 8 years ago, you were
before this committee, and I was so proud of you and proud of
Wells Fargo and the fact that I thought you guys operated as a
bank and really looked after me, a customer, somebody who has
been with the bank. Look at these young guys--I've been with
one of the predecessor banks for 40 years.
Mr. Stumpf. Thank you.
Mr. Perlmutter. And I represented some of the
predecessors--First Interstate, Security Pacific, United.
The culture is what I want to talk about, because that
really is you, and it is your board of directors.
Mr. Stumpf. Right.
Mr. Perlmutter. And I've heard terms today that I don't
really align with the banking business, if you will. I look at
banks as something different. We came in with $800 billion to
save the banking system when it was collapsing because it's
something different.
But I hear you use words today--and this is where I think
the root of this problem is--``sales organization,'' ``retail
sales,'' ``stores.'' I've never, ever in my life referred to my
branch bank in Applewood, Colorado, as a store. You don't sell
Veg-O-Matics. You don't sell grapefruit. You take people's
money, you safeguard it, and you lend it out to people who may
need it for interest, maybe me.
And to get into--this is where Mr. Green was going with the
products. I don't know how many products you have. I looked at
my account. I do like the online banking, by the way, because I
can look at all my accounts. I turn out, as Mr. Royce says, I
have eight accounts, personal accounts, with you. How I have
eight, the great eight--
Mr. Stumpf. Thank you.
Mr. Perlmutter. --I don't know, but I do.
So talk to me about why you're calling these things
``stores,'' why you use words like ``retail sales'' and
``cross-selling.'' You're a bank.
Mr. Stumpf. We are a bank, and the idea here is that we
want to make sure our team members, when you come into a bank
or any one of our customers do, that we treat them with respect
and that we provide products and services that help them. When
they do more with us, we give them a better deal. They get more
value. It helps them, and it helps us.
And whether we call them a store or a branch or a location,
it's what--it is the hearts and minds of our people who are
inside there. And--
Mr. Perlmutter. And I'll accept that. But I still think
you're a bank. And we treat--
Mr. Stumpf. We are a bank.
Mr. Perlmutter. --banks differently than we treat grocery
stores, because you're the heart of the financial system.
Mr. Stumpf. And--
Mr. Perlmutter. But here's where I want to go. So I go
into my bank, and there has been some turnover there. They
always treat me well. They're always very nice young people.
Sometimes they're saying, do you need this, do you need that. I
generally am saying no.
When you talk about these goals that are established, why
are you even setting goals? The goal should be, if your
customer needs something, try to help them.
Mr. Stumpf. Correct. We're getting rid of product sales
goals and the goal--
Mr. Perlmutter. But why did you have the goals in the
first place?
Mr. Stumpf. Well, it was an idea that--for people to make
sure that they use the right way of sitting down so they have a
conversation with a customer. I don't want to have people in
our branches or our banks to be apathetic and just not care
when people came in. I want them to sit down and have a
conversation about where that customer is on their financial
journey so they can meet a need with a product. And when it
works well and it deepens relationships, everyone wins.
No one should ever, whatever the goals are, be forcing a
product or saying why don't you do this or why didn't you buy
this. That's not the way we train. That's not the way we incent
for. But even today, we have taken that off the table, because
we're learning that customers grow with us when they're happy,
when they're satisfied. And our satisfaction scores and our
loyalty scores have never been higher. That's a better way of
doing business.
Mr. Perlmutter. All right. And I--look, I'm just up here
as a Member of Congress who has worked with banks before, but
I'm just telling you, you have to stop saying, ``Our stores
generate more deposits than our competitors.'' You have Denver
up here on your chart. That creates the wrong culture.
Mr. Stumpf. Okay.
Mr. Perlmutter. And I yield back.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from North Carolina,
Mr. Pittenger.
Mr. Pittenger. Thank you, Mr. Chairman.
Mr. Stumpf, good afternoon.
Mr. Stumpf. Good afternoon.
Mr. Pittenger. Mr. Stumpf, I'm from Charlotte.
Mr. Stumpf. Okay, great. We love Charlotte.
Mr. Pittenger. Well, you have a very major presence in our
community. I think there are some 23,600 employees who work
there.
Mr. Stumpf. Correct.
Mr. Pittenger. They are my constituents. I do have deep
respect and appreciation for the corporate citizenship that you
all have been in Charlotte. You have been exemplary in terms of
what you've done in our community. You take active roles, your
employees do, in many nonprofit organizations. And that
leadership is commended. And, of course, we cherish the Wells
Fargo golf tournament.
So you have a major presence in our community. And that's
why today is such a sad day. I know it is for you. I am sure,
as you look back on these 35 years and where you are today, you
think, ``what if?'' What if I'd have done this, what
differences could I have made? Where was I blindsided, what
mistakes? Where did I err?
And so I think--I'm asking you to look at it as if you were
sitting in our seat. We represent these people, as was said
earlier, some 750,000 to 800,000-plus people. And you heard a
lot of outrage, a lot of righteous indignation because we
haven't seen what we've all expected.
In the South Park Wells Fargo facility that you have, there
is written behind the teller station, the counter, a statement
by Mr. Wells. It came from, I believe, 1864. Do you recall that
statement? I think it's very prominent and perhaps it is in
other Wells Fargos. It seems to be the motto of your bank.
Mr. Stumpf. Are you asking me a question?
Mr. Pittenger. Yes, sir.
Mr. Stumpf. Yes, I don't--he's made a lot of statements,
but ``treat every customer with respect,'' and I can't recall--
Mr. Pittenger. Well, what we have there at the South Park,
it says, ``We have one very powerful business rule. It is
concentrated in one word: courtesy.''
So I think, as you look at all of--there's a lot embedded
in that word, ``courtesy,'' but I think that's the challenge we
have today. What could have been done differently? Certainly,
the regulators were there, yet this was reported by a news
agency.
What would you have done differently today? As you look
back on the changes and the mistakes that were made, as the
CEO, what happened in that corporate culture that did not allow
that information to come to you in a more timely fashion that
would have caused you to take even greater direction and
leadership?
Mr. Stumpf. Yes, I think it's a good question. I've
probably asked myself that a thousand times, a million times.
And while I want to defend our culture and our people, I
recognize that we could've done more earlier. And I don't know
that there's any one point, but surely we should have realized
earlier that product sales goals could elicit behavior that's
inconsistent with our culture. Even if it happened, like this
case, with 1 percent of our team, it's way too much. It's
simply not worth it. And, frankly, it's not even consistent
with where we're going, given the business today.
So, I don't know if I can be clearer than that. And there's
a lot of people doing a lot of introspection within the company
today to make sure that we never, ever put a customer or a team
member at--we want, always, customers to be the foremost of
what we do.
And if ``courtesy'' is the right word--we think of
``relationship.'' We love long-term, mutually beneficial
relationships with our owners, our team members, and, most
importantly, our customers
Mr. Pittenger. Yes, sir.
I think those of us who understand free markets--I was on a
bank board of a small bank, but we understood the customer, we
understood the importance of the financial industry and what it
does to facilitate economic growth. And that's why we're so
challenged today, because we see there has been a strangling of
regulations on the financial industry.
And yet, with that, we're having to deal with you and with
this bank and with this problem that's going to have ripple
effects. And the messaging is going to be there that there
needs to be even more oppressive regulations.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Connecticut,
Mr. Himes.
Mr. Himes. Thank you, Mr. Chairman.
Mr. Stumpf, we focused a lot today on accountability. I
want to go back to something that, like Congressman Lucas'
concerns, troubles me, which is kind of the focus on culture
and the materiality of what happened here.
We're hearing that there's not a problem with the culture,
and you're hearing an awful lot of disagreement up here. And
we're hearing, certainly in the Senate hearing, that this
wasn't material.
And I guess if you, sort of, exquisitely, finely define
materiality by the way maybe the FCC defines it, maybe $185
million in fines is not material, but this is about much more
than a legal definition of materiality. And we need to hear you
say that you understand the magnitude of what has occurred
here.
It's more than $185 million; it's about the trust and the
faith and the belief in the system. It's not about the ups and
downs of one company. It's about people's faith in the banking
system. It's about their faith in the market economy. It's
about whether competition is perceived as a good thing by the
American public or a bad thing. This is really about people's
faith in organizations like yours and like the one that you're
testifying in front of today.
But let me start with the numbers quickly here. What
matters to an investor, of course, is the value of the company
they own. And your shareholders have already paid out $185
million, including, by the way, the State of Connecticut's
pension fund.
Mr. Stumpf, do you know what the market cap, the value of
your company is today?
Mr. Stumpf. I didn't look this morning, but I think it's
$220 billion or $230 billion--
Mr. Himes. $228 billion.
Mr. Stumpf. I was--
Mr. Himes. On September 7th, when this all started, it was
$253 billion. And there has been no other material impact, so
just this event has cut $25 billion off of the value of Wells
Fargo. That's a big number.
Do you know what the value of Ford Motor Company is, Mr.
Stumpf?
Mr. Stumpf. I do not follow Ford.
Mr. Himes. $50 billion. So just since the 7th, you have
and your organization and the culture have obliterated a full
half of a Ford Motor Company. That has to be material, doesn't
it?
Mr. Stumpf. Congressman, I take this as much more than
$185 million in fines. I don't want to diminish this. I am
deeply sorry that we didn't do the right thing. And I
understand that re-earning the trust of our customers and the
American people is going to be our biggest challenge.
Mr. Himes. I appreciate that. And I do want to get away
from the numbers, because, again, I'm troubled by this whole
culture thing.
Do you think that you can fully measure Wells Fargo's value
with the hard assets, the dollars and cents, the number of
accounts?
Let me ask it another way. Are intangible things, like
Wells Fargo's reputation and brand, an important part of the
company's value?
Mr. Stumpf. There's no question. I think the most
important--
Mr. Himes. So, yes. The answer is yes. Do you believe that
Wells Fargo--
Mr. Stumpf. With an explanation, though, if I may.
Mr. Himes. Yes, okay. Go ahead.
Mr. Stumpf. I think, frankly, what is in the hearts and
minds of our people and the trust with our customer is by far
the most important thing, because they make all the rest
happen.
Mr. Himes. Do you think that Wells Fargo's reputation has
been damaged in a material way by this?
Mr. Stumpf. I think there has been damage, yes.
Mr. Himes. Okay. What I worry about is bigger than Wells
Fargo. It's the fact that the system comes apart if people
don't have faith and trust.
Mr. Stumpf, can you see what I'm holding up right here?
Mr. Stumpf. I'm sorry, but I think it's--
Mr. Himes. It's a $1 bill. It's the almighty dollar.
Mr. Stumpf. Yes.
Mr. Himes. It's a piece of paper with some green ink on
it.
Mr. Stumpf. Yes.
Mr. Himes. Does this thing have any intrinsic value? Can I
eat it if I'm hungry? Can I use it to cut wood if I--
Mr. Stumpf. No.
Mr. Himes. Does it have any intrinsic value at all?
Mr. Stumpf. It represents a promise.
Mr. Himes. It's a promise.
Mr. Stumpf. Yes.
Mr. Himes. So it relies on the faith and the belief in the
American people that this has some value. Otherwise, it's a
piece of paper with green ink on it. Is that not correct?
Mr. Stumpf. I totally agree with you, Congressman.
Mr. Himes. And can I not expand that point to the banking
system? If Americans really started getting anxious about the
fact that you don't have enough money in your banks on any
given day to cover their deposits, we'd have a problem,
wouldn't we?
Mr. Stumpf. There's no question about that.
Mr. Himes. And the only thing standing between us and this
meaning being meaningless and between them believing that the
banking system doesn't work is trust and faith in the fact that
it does.
Mr. Stumpf. Congressman, you are absolutely right. Trust
is the absolute critical element here, and we have a lot of
work to do to work on that.
Mr. Himes. So your investors are equity investors. They
accept risk, including the possibility that something like this
could happen. If you don't want this kind of risk, you buy
bonds or treasuries or whatever it is.
I would implore you, as somebody who I think understands
that the market economy is important and that the financial
services industry is important, I would implore you to please
don't continue to focus on this idea that this is not material.
I think we're now agreeing it is material.
Mr. Stumpf. I've never said--oh, go ahead.
Mr. Himes. And please work with your colleagues to repair
some of the damage that has been done to the faith and the
trust that we both here today have acknowledged is the only
underpinning of the system that has done so well by you, sir.
Mr. Stumpf. Thank you for your comments. And I couldn't
agree more. This is bigger than the $185 miilion in fines--in
fact, I don't even think in those terms--regaining trust.
Mr. Himes. Thank you.
I yield back, Mr. Chairman
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentlelady from Missouri, Mrs.
Wagner.
Mrs. Wagner. Thank you, Mr. Chairman.
Mr. Stumpf, you've come before this committee today to
answer for the appalling actions taken by your company, Wells
Fargo. I have a number of questions, but I want to start by
expressing my outrage that your company was taking advantage of
your customers, our constituents, for years and years and
years. I don't understand how your employees could create
millions of unauthorized accounts without someone raising a red
flag and, if that happened, how you failed to act on that
knowledge.
You had a responsibility to your customers, and you failed
big-time. Placing one's money and wealth in the custody of an
organization like Wells Fargo is one of the biggest displays
of--what are we talking about?--public trust. And you, sir, and
your company have betrayed that trust and taken advantage of
consumers in order to meet sales performance goals and
fraudulently improve earnings and share prices. This is wrong,
this is immoral, and this may even be criminal. And as you
stated, sir, the buck stops with you.
Not only did Wells Fargo and your employees fail these
customers, but our regulators failed as well. They neither
identified nor prevented this malpractice from occurring in the
first place. It wasn't the OCC or the CFPB that first uncovered
these deceptive sales practices that were taking place, but it
was, in fact, the L.A. Times, the media, that first brought
your company's shameful practices to light.
And while it is the regulators' job to prosecute the
banking institutions that break the law, it is our job, as
Members of Congress, to prosecute the regulators who were, in
fact, asleep at the wheel.
From what we know--and there is a lot that we don't know,
sir--this widespread abuse was occurring as long ago as 2011,
some have said maybe back as far as 2007, with 1,000 employees
being terminated every year for creating fraudulent accounts.
Yet this behavior persisted for years without management
intervening.
And even when regulators began to investigate, Wells Fargo
did nothing to notify customers and shareholders. Your company
abused its customers. While you have apologized, that apology
carries no weight with me, sir. You still have a lot to explain
to this committee and, frankly, to my constituents.
Mr. Stumpf, how many of your customers have been impacted
by your fraudulent activities?
Mr. Stumpf. Well, I don't know--I know what the PwC
numbers showed. It was--
Mrs. Wagner. What is that number?
Mr. Stumpf. It's--there were 2 million accounts that they
could not rule out, and now we're going back and contacting
those customers. Within our credit card business, as I
mentioned, we've already talked to 20,000 of them and--
Mrs. Wagner. How many in Missouri, Mr. Stumpf?
Mr. Stumpf. I can get you that.
Mrs. Wagner. As quickly as you can, please. How many
customers have been abused in my home State of Missouri?
Mr. Stumpf. There were 1,191 accounts.
Mrs. Wagner. What portion of these customers were
defrauded after you became aware of the fraudulent activities?
Mr. Stumpf. I don't know what--I don't have a timeline on
that. I just know it was broken out by credit card versus--
Mrs. Wagner. So 2 million customers, you're going back,
you're going to find out if there were more, and you don't have
a timeline? You have a timeline for the employees that you
fired year after year after year, but you have no timeline of
the number of fraudulent accounts by year?
Mr. Stumpf. I don't--I can work on that and get that to
you. I don't happen to have it in my book right now here for
you.
Mrs. Wagner. You keep saying, sir, that you're going to
make it right.
Mr. Stumpf. Correct
Mrs. Wagner. Those are your words. You're going to make it
right. I'd like to know when. When will these customers be made
whole, Mr. Stumpf? When will we know and when will they know
whether their credit scores have been affected? When?
Mr. Stumpf. Yes. Well, we're starting to work on that
right now, and we've already talked to 20,000 of our customers,
and we're hearing that 75 percent--or, less than 25 percent
either didn't want the card or didn't know they had the card.
And then we're going to--
Mrs. Wagner. 20,000 out of 2-million-plus customers?
You're just getting started now?
Mr. Stumpf. No. The--
Mrs. Wagner. It took 5 years, sir, just to identify and
begin rectifying the problem, and Wells Fargo only just
announced their sales incentives will eliminate in October.
Mr. Stumpf. Ma'am, it just--
Mrs. Wagner. When will customers--will they have to wait 5
years, sir, or longer in order to get relief?
Mr. Stumpf. The 20,000 we've talked so far is out of the
565,000 consumer credit cards. Other ones did not have, from my
understanding, a bureau involved. But we're going to talk to
all of our customers. We're going to contact them all.
Chairman Hensarling. The time of the gentlelady has
expired.
Mrs. Wagner. Thank you, Mr. Chairman.
Chairman Hensarling. The Chair now recognizes the
gentleman from Delaware, Mr. Carney.
Mr. Carney. Mr. Stumpf, I represent the whole State of
Delaware. It's over 900,000 people, one of the bigger districts
here in the Congress. We are a banking center, as you may know.
We don't have a huge Wells Fargo presence, but could you look
in your book, please, and find out how many fraudulent accounts
were attributed to people who live in the State of Delaware--
Mr. Stumpf. Okay.
Mr. Carney. --so I know what we're talking about?
Mr. Stumpf. I can tell you how many accounts that the PwC
analysis could not rule out. These aren't, again--
Mr. Carney. And your commitment is to make it right for
each of these accounts in some way?
Mr. Stumpf. That's exactly right. And in Delaware--let me
see if I have this number right.
Mr. Carney. So while you're looking at it--
Mr. Stumpf. Yes, one hundred and--excuse me--4,255
accounts.
Mr. Carney. So my responsibility is to make sure and your
commitment is to make sure that each of those accounts will
be--you will make right by those people.
Mr. Stumpf. We're going to contact every deposit account.
We're going to talk to every credit card customer that we can
make contact with. We'll try to contact all--in your district,
or in your State, there looks like there's 1,793 cards. And,
again, I don't know how many of those won't be wanted versus
wanted. And we're going to look for the secondary harm.
Mr. Carney. Thank you very much.
So part of our responsibility as Members of Congress in
this hearing is to figure out what went wrong, whether people
are being held accountable, and, most importantly, what we
should be doing going forward.
And the thing that I'm struggling with is how long this
went on before you were able to stop it. You've heard that
question on and on again.
Mr. Stumpf. Correct.
Mr. Carney. And it does for me, as Mr. Stutzman asked from
the other side of the aisle--and, by the way, I agree with Mr.
Capuano. There are very few issues in the 6 years that I've
been there where both sides of the aisle are on the same page.
When Mr. Meeks and Mr. Capuano and Mr. Posey and Mr. Duffy are
outraged on the same subject, you know that something really is
going on here.
So what about that question about whether this is an
institution that's too big to manage?
Mr. Stumpf. Again, as I mentioned to another--
Mr. Carney. Mr. Stutzman asked the question.
Mr. Stumpf. Yes. And I think this is a focused problem. We
can get our arms around this, and we will. We have--
Mr. Carney. So how can you manage such a large
organization with 260-whatever thousand employees, and not be
able to answer the questions that Mr. Ellison posed to you
about things that were happening on the frontlines? How do you
control that activity, which was, really, what was going on
here?
Mr. Stumpf. Again, we have leaders in those businesses
that could answer those questions. I don't have that level of
detail. I can surely get that.
Mr. Carney. I would appreciate it if you would. One of the
things that I've worked on here--and I'm not going to be here
after this next election--since coming is on mortgage finance
reform. And entered into the record by Mr. Meeks was a list of
Wells Fargo settlements by State and Federal regulators, and
there's a whole list of these $5 billion-plus related to
mortgage fraud, if you will.
Could you explain to me how your chain of control got out
of hand with respect to these violations?
Mr. Stumpf. Let me--regarding the mortgage--
Mr. Carney. Much more impactful on the economy, frankly,
than these fraudulent accounts, although the fraudulent
accounts are really important.
Mr. Stumpf. I don't want to minimize any of our mortgage
settlements, but we are, by far, the largest mortgage
originator. In fact--
Mr. Carney. Which is why I asked the question, right? If
you have the level of fraud that was going on with Fannie Mae
and Freddie Mac.
Mr. Stumpf. We've made settlements with a number of
agencies, as other companies in our industry have. Our
settlements have been--we've had far fewer issues, even though
we're the largest mortgage originator--and I'd like to make
this point--
Mr. Carney. The settlements were over warranties and
representations made to Fannie and Freddie, which basically
indicated the mortgages were what you said they were, correct?
Mr. Stumpf. I believe what you are referring to is an FHA
issue that we settled in the last 6 months about--
Mr. Carney. That was $1.2 billion. The Fannie and Freddie
settlements were $869 million to Freddie and $591 million to
Fannie Mae. And essentially, as I understand these settlements,
they're over information that was misrepresented to the GSEs.
Mr. Stumpf. I don't have that level of detail right now,
but I know this: Since 2009, we've made 11 million mortgages in
America to help people get lower rates or buy homes, and that
has been very important to our customers.
Mr. Carney. With an institution that large and that
difficult to manage, how do you make sure that these kinds of
things don't happen on the mortgage side as well?
Mr. Stumpf. We have a terrific team on the mortgage side.
We've done a lot of work to improve there, and we have great
leaders in those businesses, and we're trying every day to get
better.
Mr. Carney. Well, I'd like to have some additional
information if you could provide it--my time has run out--on
the basis of these settlements.
Mr. Stumpf. I will do whatever I can with our team to get
back to you. Thank you.
Mr. Carney. Thank you.
Mr. Neugebauer. [presiding]. The time of the gentleman has
expired.
The gentlemen from Kentucky, Mr. Barr, is recognized for 5
minutes.
Mr. Barr. Thank you.
I share in my colleagues' outrage over the unethical and
illegal sales practices at Wells Fargo, which opened up over
1.5 million fake bank credit card and Web services accounts in
the names of real customers, costing those consumers millions
of dollars in fraudulent overdraft and inactivity fees, and
potentially hurting their credit scores, through no fault of
their own.
And while Wells Fargo does not have a major retail presence
in Kentucky, it's likely, it's very likely that many of my
constituents in the 6th Congressional District in Central
Kentucky were defrauded through Wells Fargo's credit card
programs. And if you could reference your materials again, and
identify the number of my constituents who may have been
impacted.
Mr. Stumpf. Okay. Let me get that. And while I'm getting
that, I'd like to make it clear that of the 1.5 million deposit
accounts, very few, if any, had any credit impact. We didn't
report that to the credit bureau. So we're really talking about
credit cards here.
Mr. Barr. Potentially the accounts in Kentucky.
Mr. Stumpf. There were 629 accounts that could not be
ruled out. We didn't know--
Mr. Barr. For those 600 of my potential constituents,
you've testified today that what happened at your institution
over the last several years was not consistent with your
culture and ethics.
Mr. Stumpf. Correct.
Mr. Barr. But I have to think about those 600 Kentuckians.
Mr. Stumpf. No question.
Mr. Barr. And my constituents, who may have had an account
opened without their knowledge, without their consent, middle-
income, hardworking Kentuckians. And that may have resulted in
overdraft fees, inactivity fees, and it could very well have
damaged their credit score, and, again, through no fault of
theirs. So you've said that you want to make this right, but I
would say that my constituents, who have been damaged by your
conduct, would say that culture that allowed that to happen,
that's a rotten culture.
So, let's not lose focus on these victims. Let's not lose
focus on those defrauded Wells Fargo customers. And you said
your bank will make this right for your customers, and this
committee's job is to hold you accountable to make this right.
So will you commit to me--and we all have caseworkers and it
won't surprise me at all if we get a call from a customer who
has been wronged.
Will you commit to me, and your government relations team
commit to me, on the record, that you will work with us and our
constituents to make this fully right for them?
Mr. Stumpf. Yes. So let me just--the answer is yes with an
explanation. We are committed to making it right for every
single one of our customers. In fact, we are working with--
we're going to have a consultant that the CFPB has to approve.
We're going to have mediation. We're going to go back--and I'm
interested in results. I'm not interested in--I'll have our
team work with your team.
Mr. Barr. I appreciate that, because clearly, there was a
lot that went on wrong with your bank. No one did enough. No
one did enough fast enough to fix it.
Secondly, I want to tell you who I also think about in
addition to those constituents who have been harmed. I think
about the community banks and credit unions in my district. And
I've talked to many people who worked for small institutions in
rural Kentucky who are your competitors. And the fact that this
scandal has painted a bad picture for the entire banking
sector. And frankly, the institutions in my district that are
those community banks and credit unions, they don't have your
culture, but now they have a tarnished reputation because
they've been swept into this with you.
And we've been fighting for regulatory relief for these
small community banks, and these credit unions, that, frankly,
represent competition to big banks like you. And so what I
worry about are these small community banks and credit unions
that are now going to have to deal with the ramifications of
the bad acts of your institution.
Can you comment on your colleagues in the banking sector
that now are going to have to live with the regulatory
onslaught that is likely going to sweep them into this when
they are not at fault? And, frankly, they don't have a culture
like yours?
Mr. Stumpf. Again, I am sorry for what we did. I'm sorry
that we didn't move fast enough. Again, the vast majority of
our people, even in our regional bank, especially in our
regional bank, did exactly what was right. They followed our
culture. This is about people who did not do the right thing,
or at least about behavior that was not right, and I accept
responsibility for that, and I'm sorry about what happened.
Mr. Barr. And one final question is, you testified today
that you should have known sooner that product sales goals
would have elicited bad behavior. Was it your policy at the
time that all of this was going on to notify customers when an
account was opened?
Mr. Stumpf. When an account was opened that was not
funded, we had it automatically, within 60 or 90 days, removed
from the account file. It was not until 2015 that we finally
put it together, that there could be a fee doing this. So
that's when we did the full-blown study back to 2011.
Mr. Barr. I would think that best practices going forward,
at least, and in the past, should have been to notify a
customer when you open an account.
I yield back.
Mr. Stumpf. In fact, we do that today. Within one hour of
an account being opened today, they get a notice that an
account has been opened. And we won't even pull a credit bureau
unless we have a signature.
Mr. Neugebauer. I now recognize the gentlewoman from
Alabama, Ms. Sewell, for 5 minutes.
Ms. Sewell. Thank you, Mr. Chairman.
So it looks as if Wells Fargo has done somewhat of a deep
dive on the, I guess it's 1.5 million checking accounts and
half a million credit cards?
Mr. Stumpf. Correct.
Ms. Sewell. So can you tell me, with any specificity, what
demographics was most affected? Was it California? I represent
Alabama.
Mr. Stumpf. Yes.
Ms. Sewell. So could you tell me how many folks in the
State of Alabama were affected by this?
Mr. Stumpf. I can tell you, it does not--it was more in
the West and the Southwest, but let me get to my numbers here.
Ms. Sewell. And while you're looking, I also want to know
whether or not you have identified any commonality between
those folks who were affected, either geographical,
demographics, race, ethnicity, etc.
Mr. Stumpf. It's a good question.
Ms. Sewell. --income level. Have you sort of isolated as
to who was most affected by the fraudulent actions?
Mr. Stumpf. That's a good question. Of the 2 million
accounts that we could not identify, we couldn't rule them out,
there was no--in fact, the deposit side skewed to younger
people, not older people. And we don't take--we don't use race
or ethnicity, we don't capture any of that information. Only
age is what we capture. But I do have a number for--
Ms. Sewell. What about income? Obviously, when people are
opening up credit cards, they have to say what range of income.
Any of those identifiable commonalities between those?
Mr. Stumpf. I should have mentioned that. On the deposit
side, I don't think we do that. On the credit card side, I
don't have that information, but I can surely get back to you
on that.
Ms. Sewell. I'd like to--
Mr. Stumpf. Or at least have our team talk to you about
that.
Ms. Sewell. And you were looking up Alabama to see in the
State of Alabama how many customers were affected?
Mr. Stumpf. And Alabama had 22,795 accounts--accounts, not
necessarily customer accounts--that they could not rule out. I
don't know how many of those are going to be--
Ms. Sewell. So 22,700?
Mr. Stumpf. And 95.
Ms. Sewell. And 95. And I can assume from all your
testimony repeatedly here today that the customers in my State
will be made whole or made right, as you like to say.
Mr. Stumpf. That is our goal for every customer, and I
can--
Ms. Sewell. Now, my real question is this: Being made
right includes more than just being made whole for the damage
that was done personally to the customer. The reality is that
you've violated the public trust. It seems to me being made
whole also should go to all of the bonuses that were received
off of fraudulent information over the time period that has
been identified.
Now, how much money have you made over the 5 years of 2009
to 2015 in just bonuses? I'm not talking about your
compensation, just bonuses?
Mr. Stumpf. I don't recall exactly, but let's say--
Ms. Sewell. Would it surprise you to know that you were
paid $12 million in bonuses for at least the last 3 years?
Mr. Stumpf. Let's say it's $18 million or $20 million. I
don't recall the exact number.
Ms. Sewell. So I guess my frustration is that being made
right is not just about the personal damage that was done to
the customer base. It really is about the public trust, and--
Mr. Stumpf. It is.
Ms. Sewell. --that to me goes to every level of your
company being unjustly enriched by a fraudulent scheme such as
this. And I'd like to know what your thoughts are about how
Wells Fargo plans to make right to the public on such a
magnitude?
Mr. Stumpf. Yes. Thank you for that. First of all, I think
it's important to note that fraudulent or unused accounts hurt
customers and they hurt us. In fact, the $2.6 million of fees
that we found for this 4 years cost us $10 million to produce.
That's a losing operation. There was--people invest in our
company for a whole lot of reasons, and one is about deep
relationships of customers who use products. So an unwanted
product, an unused product is just--
Ms. Sewell. With all due respect, sir, I understand that
it hurts you, but I'm here to tell you that the customer base
and the 22,000 folks in Alabama are much more egregiously hurt
than you.
Mr. Stumpf. There is no question, and I agree with you.
Ms. Sewell. And I just want to go back to the comments of
my colleague, Mr. Ellison, who was really trying to capture the
bad business practices of your sales force. Now, do you still
have that line of business? Is that line of business still a
part of the portfolio of Wells Fargo?
Mr. Stumpf. We have a great retail banking business. We
love it. And we're getting rid of sales goals. In fact, our
customer--
Ms. Sewell. What else are you doing to make sure that this
does not happen again?
Mr. Stumpf. If I can just quickly answer that. For any
credit card opened or, any deposit account opened, there has to
be a signature today. If there's not a signature of a customer,
it can't get opened. We're also doing mystery shopping, to make
sure our people are doing the right thing.
Ms. Sewell. What's to stop a fraudulent signature?
Mr. Stumpf. Because you have to put in your PIN. Only the
customer knows that.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from Pennsylvania,
Mr. Rothfus.
Mr. Rothfus. Thank you, Mr. Chairman.
Mr. Stumpf, these charges against Wells Fargo violate any
legal or ethical standard. We know that Wells Fargo employees,
over years, opened 2 million accounts for customers without
authorization. To hit sales targets and draw additional fees,
bank employees falsified accounts and engaged in egregious
deceptive practices. This was theft, plain and simple. That the
offending Wells Fargo employees did what they did, in a
systematic way, represents a gross violation of trust.
When I first heard about these activities, my first thought
was this falls into the, ``You've got to be kidding me''
category. One is left asking, how does this happen?
Over the course of the last 5 years, Wells Fargo was firing
1,000 lower-level employees each year. We learned in last
week's testimony that it was not until 2014 that various
committees on Wells Fargo's board were informed. It's
incredible that this did not rise to the attention of the board
immediately, and it's incredible that it did not end sooner.
By any standard, these actions were wrong: 5,000 people,
perhaps more, lied, cheated and stole from customers whom they
thought would trust them. How many people in Pennsylvania were
affected by this?
Mr. Stumpf. I'll take a look at that. As I am doing that,
I just want to make a couple of comments. Many of these people,
over 10 or 15 percent, were bankers or bank managers. These
weren't all lower-level people. They were in the mid-30's to
60's.
Mr. Rothfus. How many levels in the organization chart at
Wells Fargo are there?
Mr. Stumpf. It depends on the operating business, so there
could be--
Mr. Rothfus. Are there 10 layers?
Mr. Stumpf. It could be 8 or 9 or 10 layers.
Mr. Rothfus. Eight or nine or 10. So a third-level
employee wouldn't be considered a lower-level employee?
Mr. Stumpf. The fact that these were--
Mr. Rothfus. How many people in Pennsylvania?
Mr. Stumpf. In Pennsylvania, 79,918 accounts we could not
exclude. Again, that's about the 2 million. There's--you know,
we're looking at--also understanding, right, on credit card,
only 20--only 25 percent could not remember or did not order--
Mr. Rothfus. How many branches does Wells Fargo have?
Mr. Stumpf. In our total company?
Mr. Rothfus. Across the country.
Mr. Stumpf. 6,200.
Mr. Rothfus. How many branches are identified as being
involved in this scandal?
Mr. Stumpf. I don't have that number. I don't know if
there was a team member--
Mr. Rothfus. Is this a coast-to-coast scandal?
Mr. Stumpf. Well, first of all, it's exception--it's
behavior that we did not want, and I don't know if it affected
every State or every region. I just don't happen to have that
information.
Mr. Rothfus. In the last 5 years, how many branches have
you visited personally?
Mr. Stumpf. I don't keep a count of that, but I'm--pick a
number, maybe 1,000.
Mr. Rothfus. Do you make it a practice to go behind the
counter--
Mr. Stumpf. Absolutely.
Mr. Rothfus. --and work as a teller or as a
representative?
Mr. Stumpf. To work as one?
Mr. Rothfus. Yes. Have you ever seen the show like
Undercover Boss, where the CEO comes in and does the frontline
work?
Mr. Stumpf. Yes. I'm not trained or allowed to do that,
but I walk behind the teller line and I meet our people. I talk
out in front with our bankers. There's--
Mr. Rothfus. You wouldn't have waited on a customer and
maybe stood in the shoes of one of those frontline employees,
maybe tried the cross-selling practice?
Mr. Stumpf. I've talked with them. And the vast majority
of our people are excited. Our culture and our--in fact, we
have engagement scores. Every year, we do--about 93 or 94
percent of our people participate in the regional bank in a
Gallup survey that brings into account are you happy in your
job? Do you get rewarded? Whatever. And our people are 14-to-1,
15-to-1 engaged, some of the highest scores in the industry.
Mr. Rothfus. Some of those employees had an issue. How
many whistleblowers are there, do you know?
Mr. Stumpf. I do not have that number.
Mr. Rothfus. Do you appreciate the kind of courage that it
takes to be a whistleblower?
Mr. Stumpf. Well, absolutely. Our people can call an
ethics line, and they can do it--
Mr. Rothfus. You have no idea how many whistleblowers
there are?
Mr. Stumpf. I don't have--
Mr. Rothfus. CNN is reporting dozens. Do you think that's
accurate?
Mr. Stumpf. I don't know. And we're going to work on--
every name that we get, we're going to work on.
Mr. Rothfus. Do you have any idea of how many of these
people are no longer employed at Wells Fargo?
Mr. Stumpf. I don't have that number for you.
Mr. Rothfus. Any idea how many would have been demoted?
Mr. Stumpf. I didn't get--
Mr. Rothfus. Any idea how many may have been demoted, if
any?
Mr. Stumpf. I don't have that number for you, sir.
Mr. Rothfus. I would suggest that, again, given the
courage it takes for somebody who spots something like this to
speak, and the historic protections that should be attributable
to whistleblowers, that this would be a top priority.
Mr. Stumpf. And we have an anti-retaliation program.
Mr. Rothfus. How many people at Wells Fargo are now
working on the whistleblower issue?
Mr. Stumpf. I don't know that issue. I could have my team
work with your staff and tell you.
Mr. Rothfus. Do you have any idea how many honest Wells
Fargo employees may have lost out in a race with some of the
fraudsters?
Mr. Stumpf. I don't have that answer for you. But we've
got 268,000 terrific team members.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Illinois, Mr.
Foster.
Mr. Foster. Thank you, Mr. Chairman, for holding this
hearing so we can examine the abusive and fraudulent practices
that were so pervasive at Wells Fargo. I'd like to start by
reiterating what many of my colleagues have said, that this
corporate malfeasance is exactly why we need a strong and
independently funded CFPB. As Director Cordray testified in the
Senate last week, the CFPB learned about the fraud at Wells
Fargo through its whistleblower line. It's my understanding
that he offered to be here today, but it appears that his
testimony was not needed to understand the role that his agency
played in bringing the fraud to light. And I suppose that we
don't need his testimony because the CFPB has returned more
than $12 billion to 27 million Americans, and this case adds to
that record.
The CFPB did not learn about the fraud because Wells Fargo
self-reported. In fact, the record suggests that you, Mr.
Stumpf, were informed about the fraudulent accounts anywhere
between 2 and 4 years before self-reporting by Wells. In the
wake of this incredibly egregious institutionalized conduct,
you have now come to Washington to say you're sorry. Well, of
course, your apology is appropriate, as is foregoing a portion
of your compensation, but that does not address the core
problems in the culture of the institution and the governance
rules that allowed it to develop.
As someone who started a manufacturing business and served
on its board, I understand that corporate culture starts at the
top and eventually permeates the entire organization; but your
response to the gross misconduct that drove results that you
prided yourself and the bank on has been underwhelming, to say
the least, because it's clear that the simple motivations of
keeping the trust of customers, of shareholders, and the jobs
of 5,300 frontline employees has not been enough incentive to
drive a culture of compliance among management.
So my first question to you, Mr. Stumpf, given this
situation, which actually should be a case study for corporate
mismanagement in every business school and law school in the
country, is what specific governance rules should have been in
place that would have prevented these abusive practices?
Mr. Stumpf. Thank you for your question. I acknowledged
before that we should have done more earlier. We should have
brought our corporate resources in earlier, and we should have
obviously gotten rid of sales goals earlier, because they were
misunderstood or misrepresented by some of our team members. I
think that would have been good governance.
Mr. Foster. Okay. I think I'd like to actually focus on
specific proposals. I think we've all been impressed by this
list of settlements and penalties that have been imposed on
Wells since the financial crisis that has been scrolling on the
monitors here. And, without objection, I'd like to enter that
into the record.
Chairman Hensarling. Without objection, it is so ordered.
Mr. Foster. And one specific proposal that has been made
is that regulators' penalties for illegal practices should be
paid first out of the bonus pool for top executives, so that
you and every one of your top executives would have your
bonuses at risk for any malfeasance in any corner of the
organization, rather than having the regulatory fines being
taken largely out of the hides of shareholders.
So my question to you is, if everyone knew that the
regulatory fines were to be paid out of the bonus pool, would
that have helped change the corporate culture that led to these
abuses?
Mr. Stumpf. I can't speculate on that. I know that in my
case, the board is independent, and the board actually took my
recommendation and passed that. We filed an 8-K on that
yesterday. And I'm going to do all I can to lead this company
going forward.
Mr. Foster. And we all can speculate on what fraction of
that compensation clawback would have happened without the
attention in the press and by Congress on this. For example, if
you knew that the bonus pool would take a hit for any
regulatory fines, wouldn't that actually create an incentive
not to develop a bank which was effectively too big to manage?
Mr. Stumpf. First of all, I disagree that we're too big to
manage. We need to focus more on this issue, on operational
issues and on compliance issues. But, again, we do many, many
areas really well. And I'm sorry that we didn't get everything
right along the way. And we've made settlements, we've tried to
make it right for customers.
But recognize also, we do a lot of really good things.
We're a great corporate citizen, and 268,000 team members
really try to get it right every day for all of our customers.
Mr. Foster. As we look for bipartisan solutions to try to
prevent this sort of thing from happening again, I find that a
very interesting suggestion.
And just a last quick question. Many of the actions that
were taken here hurt the credit scores of customers, which made
it difficult for them to buy mortgages. And are you
specifically looking to find out if any of your customers have
been denied mortgages because of action you've taken?
Mr. Stumpf. We're going to dig into that and make it
right. We will.
Mr. Foster. Thank you.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from New Hampshire,
Mr. Guinta.
Mr. Guinta. Thank you, Mr. Chairman.
Thank you, Mr. Stumpf, for being here. I share in the
frustration and the anger and the displeasure of my colleagues
on both sides of the aisle relative to this particular issue.
And I have listened over the course of your testimony, and
there are a number of what I would consider inconsistencies,
either based on what you've said today, what was in your oral
testimony, or what you had stated in the Senate hearing last
week.
So I want to clarify a few things. In your oral statement,
you said that you made a recommendation to the board that it
take certain actions regarding your salary and other pay.
Mr. Stumpf. That is my testimony and that's accurate.
Mr. Guinta. When did you make that recommendation?
Mr. Stumpf. It was--today is Thursday. It was sometime
before the independent board met without me. I don't recall. It
might have been--it was before or during the board meeting. But
I referred--I made comments about that to our lead director
that I wanted to do that.
Mr. Guinta. Are we talking about last week or this month?
Mr. Stumpf. Last week.
Mr. Guinta. Last week. Before or after the 20th?
Mr. Stumpf. What day is today?
Mr. Guinta. The 20th was Tuesday. Today is the 29th.
Mr. Stumpf. It was sometime after--it was sometime on the
weekend, I believe, to the best of my recollection.
Mr. Guinta. So it was after the Senate hearing?
Mr. Stumpf. It was after the Senate hearing.
Mr. Guinta. So before, you had said to the Senate Banking
Committee that you didn't want to prejudice the compensation
committee or the board process.
Mr. Stumpf. Correct.
Mr. Guinta. And since the 20th, you did exactly that. So
what has changed from the 20th to today, the 29th?
Mr. Stumpf. I felt that it would not prejudice them. I
didn't want to prejudice them, but I thought it was--and they
can do more if they want to. They have all the rights and
responsibilities.
Mr. Guinta. No, I understand that. What I don't understand
is on the 20th, you said to the Senate you did not want to
prejudice them, and then 4 days later, the 24th, which is the
Saturday over the weekend, you did a reverse course. So what
happened between the 20th and the 24th for you to change your
mind on that issue?
Mr. Stumpf. I decided that this was a good way to show, at
least a step, a start to show my level of commitment.
Mr. Guinta. Why wasn't that important then before the
20th?
Mr. Stumpf. I was preparing for other things and it didn't
cross my mind at that time. I developed that thinking sometime
over the weekend.
Mr. Guinta. That's a pretty big compensation hit, right?
Mr. Stumpf. Again, it's what I thought was right for me to
recommend to the board at that time. And they can do more. They
have all the independence. And I didn't believe that--I thought
that was the right thing for me to do.
Mr. Guinta. What about the clawback of Ms. Tolstedt's pay?
When did you make that recommendation?
Mr. Stumpf. That recommendation--she does not report to
me. That recommendation was made by her boss.
Mr. Guinta. When were you aware of that recommendation?
Mr. Stumpf. I was aware of that sometime--
Mr. Guinta. Before the 20th?
Mr. Stumpf. It was sometime over the weekend also, I
believe. I don't recall the exact days. Maybe--
Mr. Guinta. Both were after the 20th?
Mr. Stumpf. Yes.
Mr. Guinta. I want to go to a different issue. Do you
currently have sales goals at Wells Fargo today?
Mr. Stumpf. They end in our regional bank tomorrow,
because--and the reason we didn't take them out before, we
have--the vast majority of our people do the exact right thing.
We don't want to hurt them from a compensation perspective. And
we thought we could do this, and do it right, and put other
goals like customer loyalty and other things that our customers
really appreciate by January 1st. We now know that we can do it
by October 1. So we don't want to hurt them, and we also want
to make sure our customers get treated well.
Mr. Guinta. Let me move on to the CFPB. You've been asked
several times how many employees of the CFPB were embedded at
Wells Fargo. And I think what you said is something to the
effect that you will do your best to work with us, but you
didn't say clearly whether you would actually provide us that
number. So I'm curious, would you provide us with that number
when you get it?
Mr. Stumpf. Again, I don't know that answer. I'll work
with our team. The best I can do is promise you that I'll
work--I'll consult my team--
Mr. Guinta. I understand you don't know the number today.
I'm saying, when you work with your team to identify the
number, will you then share it with Congress?
Mr. Stumpf. Again, I don't know if that's a--if that's a
confidential supervisory matter or information.
Mr. Guinta. CFPB employees are public employees, aren't
they?
Mr. Stumpf. I don't want to make a promise to you that I
can't keep. So I will promise that I'll take a look at it.
Mr. Guinta. Would you speak with your leadership and try
to get us something in writing as to whether you can provide us
that answer?
Mr. Stumpf. I will work with them as soon as one of these
things get done.
Mr. Guinta. Thank you, sir.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Maryland, Mr.
Delaney.
Mr. Delaney. Thank you, Mr. Chairman.
Thank you, sir, for being here. A lot of focus has been on
your cross-sales or your cross-sell culture at the institution.
It's something that the institution has been very proud of.
When you acquired Wachovia back in 2008, your former chairman,
Dick Kovacevich, who I think was probably the architect of your
cross-sell program, said, we are combining the industry's
number one ranked customer service culture of Wachovia--and I
was a very substantial Wachovia customer in my prior life in
business and I had nothing but a terrific experience--
Mr. Stumpf. Thank you.
Mr. Delaney. --with the industry's number one sales and
cross-selling culture of Wells Fargo. This is 2008. Analyst
reports across the last decade would talk about the cross-sell
culture of Wells Fargo. But several analysts also pointed out
that there was risk inherent in this and, in fact, that this
culture might be undermining the customer experience, including
a well-known banking analyst who said, ``Wells Fargo suggests
that a successful bank is one that keeps seeking new customers
and selling as aggressively as possible more products to them
and not getting bogged down in customer service.''
So the question I have is, your board of directors--because
when you have a very large enterprise like you do, the
governance process is incredibly important. Did the board of
directors ever discuss, at the board level, whether the cross-
sell culture had gotten out of control at the bank? Because you
were clearly outperforming your peers, and you were proud of
that, and you bragged about it and you had a swagger about it.
And the law of large numbers just leads us all to believe that
it is very hard to significantly outperform your peers,
particularly when they are very big and they are also
sophisticated operators like your competitors are.
Did your board ever talk about this issue? Did they ever
actually sit around and examine whether this culture had gotten
out of control, particularly after 4 or 5 years of having to
let go so many people?
Mr. Stumpf. Congressman, I don't know all of the things
that our board talks about, because I'm not in all the
meetings, but I will say this: Cross-sell is our shorthand for
depth of relationship. We love that. When customers do more,
they get more value, it helps everyone.
Mr. Delaney. But you also make more money when you cross-
sell. There are two ways of looking at cross-sell. It's either
really good for you or it's really good for the customer,
depending upon whether they needed the product or not. I'm
really getting at the board's responsibility, because your
board is responsible to make sure that you're setting the right
tone at the top.
Mr. Stumpf. Correct.
Mr. Delaney. You're also responsible for that. I'll come
back to that in a second. But the board is responsible for
actually examining the business practices of the bank. So did
your board--you're the chairman of your board.
Mr. Stumpf. Correct.
Mr. Delaney. So you may not be there. They have executive
sessions where they may ask you to leave. You're certainly not
there when they discuss your compensation. But for most of the
meetings, you're there. You set the agenda. You probably sit in
on most of the committee meetings. I chaired a public company
board for many years.
Did you ever--did the board ever talk about whether the
culture in the retail banking business, and all of the
accolades you were receiving for your cross-sell success, and
the fact that several analysts had focused on the fact that you
were overly aggressive with respect to this, did they ever
actually ask the question, should we look into this? Did they
ever exercise their fiduciary responsibilities around this
issue, in other words, ensuring that your customers were
getting an appropriate service, which they obviously weren't?
Mr. Stumpf. Yes. And yes, the answer is yes. They--
Mr. Delaney. So you can get us evidence that the board
actually has examined this issue across the last several years?
Mr. Stumpf. Yes, I can do that.
Mr. Delaney. Did you ever give speeches where you said it
is as important to make sure we're putting our customers'
interests first as it is to achieve our cross-sell objectives?
Mr. Stumpf. I don't recall; I give lots of speeches. But I
always talk--when I am with team members or out in the public,
I try to talk about the fact that what's good for customers is
good for us. And I think it's really important, because you're
asking some really good questions here, that the idea that
somehow having a customer have more products that they don't
use helps us is absolutely wrong. It only helps if they use
them.
Mr. Delaney. Well, if they pay for them, it helps you.
Mr. Stumpf. Virtually all of them are free.
Mr. Delaney. Getting back to the tone at the top, can you
find any evidence and share with us where you actually said, it
is as important to make sure we put our customers' interests
first as it is to achieve the sales goals we've set for this
institution?
Mr. Stumpf. In fact, I don't know, I can't recall all my
words, but I do know this: Every talk I talk about, it's about
customers and putting them first.
Mr. Delaney. Now, your largest shareholder has a famous
expression where he says: It takes your whole life to build
your reputation and you can lose it in 5 minutes. Do you think
you and your institution have permanently lost its reputation?
Mr. Stumpf. We have a lot of work to do to build it back,
and I'm committed to do all I can to make that happen.
Mr. Delaney. Thank you.
Chairman Hensarling. The time of the gentleman has
expired.
The Chair now recognizes the gentleman from Texas, Mr.
Williams.
Mr. Williams. Thank you, Mr. Chairman.
Mr. Stumpf, just like many hardworking Americans and
members of this committee, I am really angry. And I also am a
customer of your bank. But I'm amazed at what you do not know
about your business. I am really amazed. And I've heard more,
``I don't know's'' from a CEO than I think I've ever heard in
my life.
I came to Congress to deregulate, and because of your
actions, it's really making it extremely difficult for me to
advocate for Main Street or community banks. So I have one
simple question for you: When are you going to resign?
Mr. Stumpf. I serve at the pleasure of the board. I am
giving all my energy now to leading this company through this.
Mr. Williams. But you can resign without the board telling
you, so I just wanted to know that answer.
I'm also angry because a large number of Wells Fargo
employees opened accounts for existing customers without their
knowledge, which is pure wrong, it's just wrong. And I'm angry
because Wells Fargo agreed to pay $190 million in collective
fines and restitutions, which we talked about today, and you
don't even have to admit any wrongdoing. And I have news for
you, people don't care about your hurt, they care about their
hurt, and I'm tired of hearing about that today. And I'm angry
because, under the Dodd-Frank Act, Wells Fargo would still be
eligible for taxpayer-funded bailout. And I'm angry because I'm
a strong supporter of banks, both big and small, but today you
really make it hard. What you've done has really hurt Main
Street.
And finally, Mr. Stumpf, I'm angry because I'm a business
owner. I own a business right now. I'm a borrower. I've been in
debt more than I've been out of debt in my life. For 44 years
I've owned my business, and it sickens me to think that you
took advantage of customers in the manner that you've done.
Customers are important. They don't make that many customers.
And, Mr. Chairman, I have also learned--if I've learned
anything over the last 44 years, it's two things: The customer
is always right. And you've tried to teach us your business
today; we don't need to hear that.
And reputation, which we've already talked about, is all
you have when you go to bed at night. And when you lose your
reputation, you've got nothing. And frankly, it's going to take
Wells Fargo a long time before they can restore customer
confidence in that reputation we're talking about.
So let me start off with this: In the past, I've been part
of a banking board like many have in here, big banks, small
banks. So I understand what that entails. I certainly
understand the charge that is given to that board to make the
bank successful, but ultimately you answer to the shareholders.
But as we heard you discuss with the Senate Banking Committee
earlier today, top executives knew about the fraud under your
watch in 2013. So, again, as someone who has sat on a board, I
find it troubling that no action would be taken at all.
So we've established that no action was taken by you or
your board in 2013, but what about your outside auditors which
we've talked about? Can you tell this committee again--and
you've touched on it a little bit--who they were and if you
advised them of this two-year-old systemic fraud?
Mr. Stumpf. So I'll get to your question. And our outside
auditor is KPMG. They do a wonderful job. And this is on us. We
should have done more earlier, and there's no question about
that. And I don't, in any way, want to minimize whatever
portion of those 2 million accounts were unauthorized. We take
that seriously. And they are the ones we put first.
Mr. Williams. So let me move on. As CEO and chairman of
the board of Wells Fargo, how often did you meet with your
board of directors?
Mr. Stumpf. We have eight board meetings a year.
Mr. Williams. Did anyone on your board tell you to stop
the incentive program, that they didn't like it, they didn't
think it was good?
Mr. Stumpf. There is a committee of the board that is
human resources and compensation, and that's not chaired by me.
I'm not a member of that committee.
Mr. Williams. So you don't know?
Mr. Stumpf. I do know that we have incentive programs and
we have controls and we have self-worth, and I don't--that's
what I know about that committee and about our business.
Mr. Williams. Did anyone on the board raise any concerns
with the incentive program?
Mr. Stumpf. There were people--as we started to understand
this issue, the board took direct action to make sure that,
along with management, we understood where the customer harm
was, and to make sure that the sales process, that we did not
have unethical behavior going on.
Mr. Williams. I'm running short on time. I'm from Texas.
Mr. Stumpf. I lived in Texas for 6 years.
Mr. Williams. How many people in Texas were affected by
your mismanagement?
Mr. Stumpf. There were 149,857 accounts that we could not
rule out as a possibility of being unauthorized.
Mr. Williams. Thank you, Mr. Chairman, I yield back.
Chairman Hensarling. The time of the gentleman has
expired.
Pursuant to clause (d)(4) of Committee Rule III, the
gentleman from Washington, Mr. Heck, will be recognized for an
additional 5 minutes upon the conclusion of the time allotted
to him under the 5-minute rule. The gentleman from Washington
is recognized.
Mr. Heck. Thank you, Mr. Chairman.
Mr. Stumpf, after sitting here patiently for nearly 4
hours, my takeaway, frankly, sir, is that you are in denial.
And I say that because I can't reconcile much of what you have
said with the known fact pattern. You have said, I didn't know,
in essence. You said, a very small percentage of our dedicated
workforce was actually engaged in this behavior. You said
you're sorry; in fact, you're very sorry. And you said, we're
going to fix it.
But the facts are that 5,300 of your employees were fired
for inappropriate behavior. And they were fired because they,
in effect, misappropriated millions of dollars in fees without
the agreement of your customers, an act which you yourself
agreed with Congressman Duffy constituted stealing. And all of
this and the publicity surrounding it led to a $25 billion
reduction in the market capitalization of your company. I
cannot reconcile what you said with those facts and I can,
therefore, only conclude that you are in denial.
Some here, several, have said you should resign. Frankly, I
don't personally see how you survive. I don't know this. But I
too have been on a board of directors, and it's virtually
inconceivable to me that your board of directors would see fit
to claw back $41 million in bonus and incentive pay without
also concluding you're no longer the correct person to lead
this organization.
But the truth is, it's not your survival that I am
concerned about. I am concerned about your company, your bank,
your institution, the 268,000 people that you employ, and more
importantly, the millions and millions of depositors. I'm more
concerned about the trust level in Wells Fargo and in the
financial sector, banks and credit unions, because it is, in
fact, vital and the heartbeat of a market-based and capitalist
economy. And I'm very concerned about what you and the company
have done in the way of damage to that.
I'm not going to suggest that you resign. I don't think
it'd do any good, because I think you are in denial. But I am
going to remind you of some things that you have said. I know
right from wrong. I tried to lead with courage. I'm going to
make it right. You also said that you feel privileged to lead
Wells Fargo.
Mr. Stumpf. Right.
Mr. Heck. And on that, sir, I'm going to take you at your
word. And so my hope, my request--and this is not a question.
In fact, I would suggest that it's beyond a hope, it's a
prayer--that in the quiet and solitude of your home and in
discussions with your family, you ask yourself what's in the
best interest of Wells Fargo? What's in the best interest of
Wells Fargo, sir, not you.
I do have a quick question. I think some other people have
noted that it looks like you're repeating some mistakes in the
facts of this case, falsified applications, consumers being
pushed into products they don't want, and all driven by
aggressive sales goals that are almost identical to your
practices that led to a record fine against you in 2011. In
fact, in 2012, you paid violations for violating the
Servicemembers Civil Relief Act (SCRA) for foreclosure of homes
in violation of Federal law.
I am privileged beyond measure to represent 20,000
uniformed personnel at Joint Base Lewis-McChord. You're under
investigation again, sir, for violating the Servicemembers
Civil Relief Act for foreclosing on cars. Also prohibited. We
don't want men and women in uniform--
Mr. Stumpf. Correct.
Mr. Heck. --worrying about that when they're putting their
life in harm's way. And I'm going to predict that you're going
to pay another fine for violation of SCRA in the millions of
dollars.
So rather than ask a question, I'll just say, this pattern
just keeps repeating itself. You pay a fine, you promise to fix
it, and then lo and behold, a few years later, we're back at
it, the same thing again.
And with that, Mr. Chairman, I would like to yield the
balance of my time to the ranking member from California.
Ms. Waters. Thank you very much, Mr. Heck, for yielding
this time to me.
As you know, as the ranking member, I have the
responsibility for some kind of leadership here, and I'm very
pleased that I was able to work with the chairman of this
committee, Mr. Hensarling, today to get this hearing. But as I
have sat here, recognizing the size of Wells Fargo, $1.9
trillion in assets, with over 6,200 bank branches, 268,000
employees, it's really striking me how huge this bank is.
I'm also concerned about whether or not, as chairman and
CEO, you can really know what is going on at the bank. I am
concerned about the length of time it took you to know what's
going on, and I'm concerned that maybe you don't have a handle
on your management and what the reporting process is that would
make you aware of what's going on.
You praised Ms. Tolstedt for her management of the
division, even though she had fired 1,000 employees for this
fraud in 2011, and yet supposedly it took you 2 years to know
about what had happened. She didn't tell you. She withheld the
information. And you indicated in her glowing retirement that
she had done a great job.
I'm really concerned about whether or not--in fact, you
understand that we have been sitting here fighting to implement
Dodd-Frank and trying to work out some of the problems that
have been identified with Dodd-Frank. But you are on the board
of directors of the Financial Services Roundtable. It's an
advocacy group for the banking industry that has worked to
defund the CFPB, hobble its structure, and remove its ability
to curb abusive practices. Now I want to know perhaps what you
think, now that Wells Fargo has been caught by the CFPB for all
of this fraud, and I wonder if you denounce the Financial
Services Roundtable's actions to get the CFPB.
In addition to that, while we've been sitting here, I have
learned that maybe not only is Wells Fargo too huge to manage,
but maybe the reason you don't know some of the detail is
because you also sit on a number of big boards. You're sitting
on the board of Chevron for $375,000 in total compensation per
year, and you're on the board of Target Corporation for
$272,000 in total compensation per year. You have a
responsibility to them. You have a fiduciary responsibility.
And in addition to that, during this hearing, Bloomberg sent
out an alert that you will be facing a $20 million penalty for
improperly repossessing cars from members of the military. It
appears that the company can't even make it through this
congressional hearing without us learning more and more
information about what is going on at Wells Fargo.
I appreciate your apology. I appreciate the clawback and
all of that.
But, Mr. Chairman and Members who are left, I have come to
the conclusion that Wells Fargo should be broken up. It's too
big to manage. I served on the conference committee for Dodd-
Frank. We talked a lot about the living wills and how to learn
more about how these banks are put together and how they
operate. And, of course, the five largest banks in this country
have failed the living wills test, including Wells Fargo. And
so I'm looking at living wills and the inability to pass the
test. I'm looking at stress testing. I'm looking at size. I'm
looking at this particular fraud that has gone on, and I'm
worried for the whole banking community that the public cannot
and will not continue to trust our banks, which we need in this
economy in order to do the business to make the economy work
and run. But they're looking at us and they're saying for all
of you, particularly those of you who serve on the Financial
Services Committee, you're letting us down, you're not
protecting us.
And so, with that, Mr. Chairman, I'm going to be talking
with you and the members of this committee who showed their
outrage here today. I'm moving forward to break up Wells Fargo
bank.
Mr. Stumpf. May I respond to that, please?
Chairman Hensarling. We'll give the witness an opportunity
to respond.
Mr. Stumpf. As I said before, I'm sorry that we didn't get
this right. I take this very seriously. I'm not in denial. And
we will get this right. We will fix this. We do a lot of things
really great. California is our home State. We've been there
for 164 years. We are a major employer, a major philanthropic
institution, and we are privileged to serve so many great
customers there, and we'll do that the best way possible.
Chairman Hensarling. The time of the gentleman from
Washington has expired.
Pursuant to clause (d)(4) of committee rule 3, the
gentleman from Arkansas, Mr. Hill, will be recognized for an
additional 5 minutes upon the conclusion of the time allotted
to him under the 5-minute rule.
Mr. Hill. Thank you, Mr. Chairman. I thank the ranking
member for holding this hearing.
Mr. Stumpf, thank you for being willing to appear today. I
appreciate your forthright testimony.
I have been a customer of your company and I've admired
your company and I've used your company as an example for my
own businesses in the past 20 years in developing what I
thought were best practices and goal-setting for retail bankers
across the businesses that I was associated with in the 1990s
and the 2000s. And during that period of what has happened
recently, I've recommended your company as a company to do
business with and a stock to own.
So that comes with a pretty heavy burden for me. I have the
same knot in my stomach that you probably have.
Mr. Stumpf. Yes.
Mr. Hill. Because, in my view as a former person who has
worked in finance on and off for 35 years, this just isn't a
one-off situation down in the Los Angeles basin that Wells
Fargo is struggling with. It really is a systemic compliance
failure inside the, I assume principally, the retail portion of
the bank.
And I know that it's a huge frustration for those of us on
this committee and for your members of your board and your
management team, and very hurtful to the customers that have
been damaged by it, their reputations, their credit
potentially, including the 933 people in Arkansas who have been
affected by this, that resulted in 4 people who apparently
worked for you in Arkansas who were fired as a part of the
sweep across your company.
So you've told us today about line management between you
and the branch manager, many layers, branch managers, regional
managers, area managers that report up, I assume, to Carrie
Tolstedt who has been discussed today. Is that generally right?
Mr. Stumpf. Yes. There's a new leader now in that retail
banking business. Her name is Mary Mack. And they have--and
she's now in charge of that organization.
Mr. Hill. And did Carrie report to Tim Sloan or report to
you?
Mr. Stumpf. She reported to me until maybe about a year
ago or so. I don't recall the exact date. But then she reported
to Mr. Sloan after that.
Mr. Hill. And the credit card issue I assume doesn't
report to her. Does that report to the consumer lending
executive or to the community bank?
Mr. Stumpf. That's--that--the--there's a relationship
there, but it reports in someplace else. That's right.
Mr. Hill. Okay. So it's a matrix management to the retail
side, but through the consumer lending channel is where credit
cards--
Mr. Stumpf. I would describe it this way: That the retail
bank would talk to customers and then they would send the
request over to the credit card group, which would do the
underwriting and fulfillment.
Mr. Hill. And all those people that I named all sat on
your operating committee of management. And how often does that
group meet and is it by teleconference--
Mr. Stumpf. No.
Mr. Hill. --or is it face-to-face?
Mr. Stumpf. It's largely face-to-face. It's every Monday.
Mr. Hill. Every Monday. And so unrelated to the board,
which meets just--I think you said in 2015, you had nine
meetings of the board.
Mr. Stumpf. I thought it was eight. But it might have been
nine.
Mr. Hill. Yes. And you had 14 meetings of the audit
committee during 2015, according to your proxy. But that
operating committee meets every Monday.
So one question I have is, do you remember this being
talked about at that operating level when line managers bring
their top concerns to you, and was it in this same timeframe?
It wasn't until maybe 2 years after this was really manifesting
itself in Los Angeles?
Mr. Stumpf. Yes. It was being managed within the business
in 2011. Each business has their own corporate--or their own
compliance, their own sales efficacy and so forth. So it was
brought out of the sales part into the line's control function.
And then by 2012, they were reducing goals. In 2013, is where
we brought the corporate resources in, like corporate human
resources, corporate investigations and so forth, because we
saw a spike in that behavior.
Mr. Hill. Right. So now your lead director. Steve Sanger,
who's the former CEO of General Mills, is conducting an
independent investigation that he's hired--independent of the
corporation, he's hired his own resources, and that's commenced
recently. Is that right?
Mr. Stumpf. As I understand it, Steve Sanger, as our lead
director, along with the other independent directors, have
hired counsel, and they are doing their investigation.
Mr. Hill. When do you expect they'll finish their work?
Mr. Stumpf. I'm not part of that process so I don't know,
but I know they're going to do a full comprehensive review.
Mr. Hill. I hope that gets released to the public once the
board has seen it and reviewed it, and that it could be posted
out on your website. Because I think that sort of independent
review renews confidence in the corporate governance system,
and I would encourage that to be done.
When I was at the Treasury Department in 1990, 1991, we had
a little problem in the government securities business. And
your largest shareholder, Mr. Buffett, became the CEO of
Salomon Brothers in the midst of that crisis. And Salomon
Brothers was found guilty of manipulating the U.S. Treasury
market at that time.
Have you talked to Mr. Buffett about this or sought his
advice on this matter you're facing?
Mr. Stumpf. I have talked to a lot of our investors, and I
have had one conversation with Warren Buffett.
Mr. Hill. Because Warren Buffett, in 2 minutes before the
Senate Banking Committee in 1991, probably did the best job, I
think, on behalf of corporate America. Do you remember what he
said at that time?
Mr. Stumpf. I've read a lot of his things. I think there
was something about, I'd rather make less money, and about
integrity and--but go ahead and read it to me. I don't remember
that testimony.
Mr. Hill. Well, I'm going to paraphrase it. He said--first
of all, he wanted every employee to be their own compliance
officer, his or her own compliance officer. And he wanted every
employee, every day when they came to work, to think about the
actions they took on behalf of customers, that they could read
that in their own hometown newspaper written by a critical
journalist.
But he summarized it, and what I think you need to
summarize, if you're going to be successful in this endeavor,
he made this quote, which I think people have quoted now for 25
years, ``Lose money for the firm, and I will be understanding;
lose a shred of reputation for the firm, and I will be
ruthless.''
Mr. Stumpf. That's what I was trying to refer to and
that's what I remember from that, and I agree with him.
Mr. Hill. Well, that's where we are, because I agree with
my colleagues, this is hurting the ability of the banking
industry to do consultative selling. Something that we all
pride ourselves on in financial services is that we seek to
understand the needs of our customers and try to meet them. And
this damage by what has happened at Wells Fargo is going to
hurt that effort on behalf of community banks all over this
country and cause sweep investigations of incentive sales
programs and cross-selling programs or consultative selling,
which is really what we're talking about.
But I hope that we will also ask our regulators where they
were at this time. The OCC clearly needs to improve rating for
you in compliance and some intensive work you were doing over
those 2 years. But I see no evidence so far that the CFPB,
which actually has the statutory obligation to be engaged here,
was taking action.
So the last thing I'll ask you about is, Mr. Himes talked
about materiality. And in any one quarter, accountants and
lawyers and bean counters and companies in your finance
department tell you what's material and what's not. But we see
sometimes the trees for the forest in that situation. And
you've got the ability and your board has that ability to
address that. In the chairman's letter to your shareholders--
you don't need a lawyer to tell you what to write in your
chairman's letter. And when you spend 50 percent in fines and
penalties of your net income over a 3-, 4-, 5-year period,
that's material. Ten billion compared to 22 billion, it's a big
deal, no matter how many small bites at the apple that it comes
in.
And I hope in your 2016 letter to shareholders, that you
and your lead director, Mr. Sanger, will address what I think
is a systemic failure in a few areas of Wells Fargo that's
tarnished this beautiful almost 2-century reputation of your
company.
And, with that, I yield the balance of my time to Mr.
Guinta from New Hampshire.
Mr. Guinta. I thank the gentleman from Arkansas.
Mr. Stumpf, I want to follow up a little bit on the
regulators. How many regulators did the OCC have on-site at the
time?
Mr. Stumpf. I didn't hear the question. Please.
Mr. Guinta. OCC. How many examiners did they have at Wells
Fargo at the time?
Mr. Stumpf. I think I testified earlier, I think it's
around 80.
Mr. Guinta. Okay. And how many do they have at Wells Fargo
today?
Mr. Stumpf. I don't have that number, but I think it's
about the same number.
Mr. Guinta. Same number? How about the Federal Reserve?
Mr. Stumpf. I don't know that number.
Mr. Guinta. And how about the CFPB today?
Mr. Stumpf. I don't know that number.
Mr. Guinta. Did anyone at the CFPB instruct you or your
team or advise you not to share those numbers with Congress?
Mr. Stumpf. I have not spoken with the CFPB on that.
Mr. Guinta. Has anyone on your team, to your knowledge?
Mr. Stumpf. Nobody on my team has said anything to me
about not sharing any numbers.
Mr. Guinta. I ask that because--
Mr. Stumpf. On that issue.
Mr. Guinta. I ask that because you seem very reluctant to
share the information with us as to how many examiners from the
CFPB either were or are currently at Wells Fargo, and that
concerns me.
Mr. Stumpf. I want to make sure I'm very clear on this. I
happen to know the OCC number because I was talking with the
OCC, but I don't know the other ones.
Chairman Hensarling. The time of the gentleman from
Arkansas has expired.
Now the gentleman from Colorado, Mr. Tipton, is recognized.
Mr. Tipton. Thank you, Mr. Chairman.
Mr. Stumpf, I have a letter from someone who has never had
an account with Wells Fargo, had an account fraudulently
opened, and was sent back from your compliance department, the
Wells Fargo financial crimes manager, telling someone who
wasn't your client that he needed to be able to provide a
complete, signed, notarized return affidavit of identify theft,
provide documentation, collection letters he may have received,
request a letter of verification for Social Security number
from the Social Security Administration, send a copy of the
police report stating he was a victim of identify fraud, send a
copy of his driver's license, send proof of address, send a
copy of previous bills, statements, invoices during the time
frame of fraud. He didn't even have an account with you. Isn't
that a little bit burdensome? And what are you doing to be able
to respond to people who have no connection with Wells Fargo
but yet are now swept up in the net of the challenges that your
organization has created?
Mr. Stumpf. Yes. So on that issue, I would like to see it
so our people could take a look at it. I don't know that issue
specifically, but that sounds to me a lot like identify theft
by someone else.
Most of what we saw, and I can't say exclusively, but of
the 2 million accounts that could not be excluded, those were
accounts that people already had at the bank and one of our
bankers improperly opened a second account that our system
closed. So this sounds a lot like identify theft to me. But I
don't know that situation in particular. I'd like to look at
it.
Mr. Tipton. I'd like to be able to get a little personal
assessment by you of you. Would you label yourself as CEO/
chairman of Wells Fargo as aware and engaged?
Mr. Stumpf. Well, I believe I am. I love this company.
I've been here a long time, and I spend most of my waking hours
thinking about this company.
Mr. Tipton. I'd like to be able to follow up a little bit
maybe on Mr. Neugebauer's question in regards to the board. You
said you think about it a lot, all of your waking hours. When
did you make the board aware of the issues?
Mr. Stumpf. The board was made aware, generally, of issues
by--in committees at high levels in the 2011-2012 timeframe. By
2013, we had talked about maybe in one--I can't remember which
committee it was. Surely by 2014. And then when we finally
connected the dots on customer harm in 2015, the board was very
active on this.
Mr. Tipton. So you discovered it in 2013. You were aware,
you were engaged. We are now in 2016, and now you're rapidly
starting to respond. There seems to be a little bit of a
disconnect in terms of the response mechanism that you're
having there. Mr. Hill had just brought up, and you gave a
response, saying that you had a sense of urgency. Who have you
fired?
Mr. Stumpf. As I mentioned, we fired managers, managers'
managers, and managers of managers. And we're doing a full
review of anybody who was responsible for any behavior of any
kind that would not put customers first.
Mr. Tipton. So are you trying to be able to say really
that these were just kind of lone wolves acting independently?
Or were they following policies that came from the engaged,
urgent manager who is the CEO and chairman of Wells Fargo?
Mr. Stumpf. They were doing exactly the opposite of what a
CEO wanted them to do. Everything I've talked about, everything
that we train, everything that we publish--
Mr. Tipton. So do you have a problem with monitoring from
the top down?
Mr. Stumpf. We should have done more. It was our
monitoring that found this behavior. We should have done more
sooner. I give you that, Congressman.
Mr. Tipton. You have an infrastructure that is set up, a
chain of command, in terms of your organizational chart.
Somebody was overseeing the manager of the manager--however you
want to be able to describe that.
Mr. Stumpf. Yes.
Mr. Tipton. Are there going to be any consequences at that
level?
Mr. Stumpf. We're going to let the facts take us where
they are, and people will be held accountable. I can guarantee
that.
Mr. Tipton. Do you have any kind of timeframe for that?
Mr. Stumpf. I don't want to foreclose anything that we do
to make sure we do it right and people are held accountable.
Mr. Tipton. There was a report that came out of The Wall
Street Journal that said that a person in charge of creating
the yearly sales plan for the community banking unit didn't
know that the numbers were exaggerated. Can you identify
exactly, though, when you're looking at this, where the
breakdown did first start?
Mr. Stumpf. I don't--I didn't read that article. I don't
know what that's referring to. But I know that a lot of us,
including myself, should have done more earlier.
Mr. Tipton. Thank you.
Mr. Chairman, my time is up. I yield back.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from Maine, Mr.
Poliquin.
Mr. Poliquin. Thank you, Mr. Chairman. I appreciate it
very much.
Mr. Stumpf, you're the CEO and the chairman of the board of
Wells Fargo. Is that correct?
Mr. Stumpf. That is correct.
Mr. Poliquin. How long have you had that position?
Mr. Stumpf. I was named CEO in the summer of 2007 and I
was named--
Mr. Poliquin. Okay. So roughly--
Mr. Stumpf. --chairman in, okay, beginning of 2010.
Mr. Poliquin. Okay. So 6, 8, 9 years in that--roughly in
that position?
Mr. Stumpf. Yes.
Mr. Poliquin. How long have you been at the bank?
Mr. Stumpf. I've been at the bank--it will be 35 years
in--
Mr. Poliquin. Okay. So you've been at the bank a long
time. And one could conclude, and I think you would agree with
me, you know the bank pretty well.
Mr. Stumpf. I love this company, yes.
Mr. Poliquin. Yes, okay. You know what really bothers me,
Mr. Stumpf, along with other things? It's that I'm looking at
this pattern of you folks ripping off your customers, getting
caught, paying a fine, and doing the damn thing all over again.
Now, we just had on the board a minute ago, 13 instances of
this in the last 6 years. And you paid a total of $11 billion
in settlement fines.
Now, you just stood here before us and told us several
times you know the difference between right and wrong. You're
the head banana over there. I look at you, I look at Wells
Fargo. I know it's a big organization. 268,000 employees.
268,000 jobs. Thank you for that, sir. But you know something?
I don't think management, which means you, knows the difference
between right and wrong.
But I'll tell you who does. The people I represent in
Maine. I represent 650,000 of the most honest, hardworking
people you can ever find anywhere. They know the difference
between right and wrong. And one thing I want to just throw out
in your lap right now, be very clear. I don't know where this
is going. But I will not support in any way, shape, or form any
kind of bailout using taxpayer money for Wells Fargo. You will
have to get through me, and through a lot of other people on
this committee.
Now, here's what I worry about. I don't worry about Wells
Fargo. You have 268,000 employees. How many attorneys do you
have over there?
Mr. Stumpf. I don't have that number.
Mr. Poliquin. Okay. Do you have more than 10?
Mr. Stumpf. Yes.
Mr. Poliquin. Do you have more than 1,000?
Mr. Stumpf. I don't--no, I don't--
Mr. Poliquin. Okay. You have a lot of attorneys, right?
Mr. Stumpf. Yes.
Mr. Poliquin. I don't worry about you folks. Somehow, some
way you're going to make your way through this. You know who I
worry about? I worry about our 31 community banks, local banks
in the district that I represent. Highly rural, Mr. Stumpf.
Thirty-one community banks, 500 branches, 9,200 employees. Good
paychecks, good jobs with good benefits. We also have 58 credit
unions with 196 branches and 2,250 employees. These folks are
relied upon in their communities. They take their paychecks,
and they trust the teller, and they trust the bank manager. But
do you know what happens? When this happens, it flows downhill.
And that's exactly what happened in the financial meltdown
7, 8 years ago, is that all of a sudden because of a small
handful of big money center banks that took too much risk with
the problem with the regulators, I understand this, everyone
was culpable. But all of a sudden, we have this very smothering
set of financial regulations that are choking off home loans,
mortgages to the folks in my district. They can't get a small
business loan to put a new diesel in their lobster boat.
Now you come along. I don't know where this is going to go,
but I will tell you this. The probability will be high that
your organization and the actions of you in your organization,
this systemic pattern of misbehavior and gross mismanagement,
and it looks like fraud, is going to find its way to the
community banks and the folks who rely on them in rural Maine.
You ought to be ashamed of yourself.
What do you tell a family? What do you tell a family who is
looking to add their fourth child to their family and they need
to put a put a new bathroom in their house in Ellsworth, Maine,
and they can't get a loan because of the regulations? And now
it's going to get worse. What do you tell them?
Mr. Stumpf. Senator, I'm--
Mr. Poliquin. Congressman.
Mr. Stumpf. Congressman.
Mr. Poliquin. You're asleep over there.
Mr. Stumpf. I'm so sorry, Congressman. I'm sorry for what
we've done. Our people also live and work in these
neighborhoods, in these communities, and we're trying to do the
right thing. I can't--
Mr. Poliquin. You should have been trying to do the right
thing, Mr. Stumpf, during these 13 settlements, fines, call
them what you want, over 6 years totaling $11 billion. That's
the pattern that I see.
Mr. Stumpf. Yes. Well, there's no question that we've had
a lot of settlements. And every one we've learned from and
we're trying to do a better job. Thank you much.
Chairman Hensarling. The time of the gentleman has
expired.
There are no other Members in the queue. I wish to thank
our witness for his testimony today.
The Chair notes that some Members may have additional
questions for this witness, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to this witness and to place his responses in the record.
Mr. Stumpf, we will expect you and your organization to
respond promptly and to fully cooperate with our ongoing
investigation.
Also, without objection, Members will have 5 legislative
days to submit extraneous materials to the Chair for inclusion
in the record.
This hearing stands adjourned.
[Whereupon, at 2:10 p.m., the hearing was adjourned.]
A P P E N D I X
September 29, 2016
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