Lawmakers ask Wells Fargo CEO: 'Why shouldn't you be in jail?'

WASHINGTON – In more than four hours of intense and hostile questioning on Thursday, lawmakers denounced Wells Fargo's history of illegally created sham bank and credit card accounts opened by its employees in the names of real customers: It was "theft," "a criminal enterprise," identity fraud, an outrage, and a devastating blow to the entire banking industry.

But the company's chief executive, John Stumpf — whom the members of the House Financial Services Committee personally blamed for the persistent and widespread misdeeds — stuck to the same script he has used throughout the crisis. The problem, he explained, was an ethical lapse limited to the 5,300 employees, most of them low-level bankers and tellers, who had been fired for their actions since 2011.

At the hearing on Thursday, Stumpf, a native of Pierz, Minn., apologized repeatedly for his bank's failings and repeated his earlier pledge — given last week to the disgruntled Senate Finance Committee — to accept "full responsibility" for them. But he again rejected lawmakers' attempts to cast the scandal as a consequence of broader failings in Wells Fargo's leadership and corporate culture.

"I led the company with courage," Stumpf said.

In between the Senate's hearing with Stumpf and the House's, the board of directors of Wells Fargo agreed to claw back $41 million of Stumpf's unvested stock awards, deny him his annual bonus this year, and strip away a portion of his $2.8 million base salary. Stumpf, the board's chairman, said he approved of the decision. Carrie L. Tolstedt, who until recently ran the Wells Fargo retail banking operation, will lose $19 million in compensation.

Confronted by lawmakers with evidence that the practice of setting up phony accounts to meet sales goals might have gone back much further than the bank has admitted, perhaps to 2007, Stumpf said that Wells Fargo was continuing to investigate the extent of the problem, how far back it stretched and who knew.

But those steps did not appease the lawmakers. Several called for Stumpf's resignation, and others asked why he shouldn't be jailed, like a bank robber.

"Something is going wrong at this bank, and you are the head of it," said Rep. Gregory Meeks, D-N.Y., adding, "You should be fired."

Stumpf replied, "I serve at the pleasure of the board."

Meeks, at times pounding the table for emphasis, asked if Stumpf would have set free someone who had robbed a Wells Fargo Bank, then simply apologized and taken responsibility. Criticizing Wells Fargo's "criminal activity," Meeks said: "Your bank, Wells Fargo, has given the entire financial services industry a black eye."

Congressional hearings to rake Wall Street leaders over the coals for their companies' illegal acts have become a common spectacle — a point several members mentioned during the hearing.

"To the American people, this kind of feels like déjà vu all over again," said Rep. Jeb Hensarling, R-Texas, who is chairman of the committee. "Some institution is found engaging in terrible activities. There is a headline, fine, and yet no one seems to be held accountable."

Wells Fargo has been in crisis mode since it acknowledged this month that its employees had, over the course of several years, opened as many as 1.5 million bank accounts and 565,000 credit card accounts that may not have been approved by customers. The company agreed to pay $185 million in penalties and fines to settle cases brought by federal regulators and the Los Angeles city attorney, and said it had fired 5,300 employees.

Wells Fargo has said it is contacting all of the customers who may have been affected. So far, the bank has contacted 20,000 customers with questionable credit cards. About a quarter of them have said that they did not apply for the card or could not remember if they had, Stumpf said at the hearing.

He also said that Wells Fargo would eliminate its product sales goals for retail bankers by the end of the week, accelerating the bank's previously announced plan to drop them by the start of next year. Ex-employees say those sales goals led to intense pressure on workers to cheat to fulfill unrealistically high quotas.

The plight of Wells Fargo workers who lost their jobs for not meeting sales goals came up several times during the hearing, with lawmakers citing personal experiences from their constituents. Rep. Nydia M. Velázquez, D-N.Y., asked how many workers Wells Fargo had fired for falling short.

"My understanding is that people should not be fired, terminated for missing sales goals," Stumpf answered. "I'm not saying it didn't happen. We're doing a review of whatever, whoever might have been terminated for that."

As for those who did take the fall for the illegal account openings, Rep. Brad Sherman, D-Calif., was particularly acerbic. "You fired 5,300 people," he said. "You took 5,300 good Americans and turned them into felons." It is time, he concluded, to break up the big banks.