Wells Fargo survives fraud scandal in congressional hearing

At least in the short term, a scolding from a politician can be costly, but it takes a lot more to bring a big bank down.

John Stumpf, the Pierz, Minn., native and the boss of Wells Fargo, appeared at a congressional hearing to explain how his employees — they’re called “team members” at the bank — engaged in fraudulent business practices, signing customers up for products they didn’t want.

“This is not good for our customers and that is not good for our business,” he said. “It’s against everything we stand for as a company. That said, I accept full responsibility for all unethical sales practices in our retail banking business, and I am fully committed to fixing this issue, strengthening our culture and taking the necessary actions to restore our company’s trust.”

That’s when Sen. Elizabeth Warren took over.

As Warren spoke, Wells Fargo’s stock price dropped.

But it was short term as investors figured the scandal, like most banking scandals, would blow over. And maybe it already has. The stock is up more than 1 percent in today’s trading.

  • MrE85

    I don’t think I’ll ever be too big to fail. (sigh)

    • tboom

      Eat more foods with sugar, carbs and saturated fats. Failure is an option. 🙂

  • Veronica
  • wjc

    When employees have the quality of their work measured by specific metrics, and they are paid bonuses based on those measurements, you can be sure that they will find a way to get the money. There is nothing surprising about this scandal.

    Companies need to take more care in how they measure performance. This is the same phenomenon that has led some car dealerships to move toward salaried sales staff. If a sales person’s pay is defined by getting each sale, they will find ways to get those sales at the expense of other staff and at the expense of the company’s image.

    • jon

      Middle Managers don’t want to hear it.
      They want to measure performance in a way that makes their team (and by extension themselves) look good.

      I’ve brought this topic up to managers across organizations and explained (in simple terms) that if you measure performance based on volume then a lot of work will get done, but quality will drop, if you measure on quality volume will drop, you need acceptable levels of quality (anything more is a waste of resources) and acceptable levels of volume. If some one is scoring exceptionally high on any measure you need to take a look at their work because odds are they’ve found a way to work the system…

      While it sounds good on paper, doing it in reality is hard, so instead they pick a number to measure by and go with it, then the whole team’s numbers look good (because they game the system to get good numbers) so they get to tell their bosses how great they are (regardless of if they actually are great or not)

      Or worse they invent some measures that are terribly inaccurate or completely meaningless and claim they mean something.

  • Jeff

    I never know what someone means when they take “full responsibility”. It’s a sort of apology, “you got me” with none of the consequences. I appreciate Sen. Warren spelling it out for him.

  • Will

    I’m still baffled as to why tech companies haven’t completely undercut traditional banks at this point in time. No one wants all these sales people harassing them, you can get loans online without all that overhead…a traditional bank seems like a waste in today’s Internet age.

    • Tim

      Credit unions are the way to go, IMO. I belong to one and I don’t see myself ever going back to a regular bank without a very good reason.

      • tboom

        I’ve been in a couple credit unions over the years and frankly I never felt I was getting any better deal than at a standard bank. One credit union changed the CU organization to a mutual bank organization, it’s unlikely I’ll ever get involved in another CU.

    • Tyler

      Read Elon Musk’s biography – he had far grander visions when launching Paypal than what ended up happening. My perception is that the big banks know how to slap down any upstarts.

      • jon

        Regulations cut both ways.

        A heavily regulated industry has fewer successful startups, banks get to play off of that…

        Paypal got slapped around a lot for not following banking regulations (because they claimed to not be a bank) in the early days…

  • KTN

    Just read some of the transcript, and man did Senator Warren take him to the shed. Awesome, but in the end, he will not resign, nor will he fire any of his senior management, and the stock price will recover. Then next week we will have forgotten all about it, and will find new outrage over something else. But until then, we can thank the good Senator for pushing hard to make substantive changes in the industry.

  • Anna

    The political pundits were right. Elizabeth Warren should have run for the Democratic nomination. I’m just sorry she is not still running the Consumer Protection Bureau. If she was, the whole Wells Fargo debacle would likely never have occurred.

    I think the quote is “The only way evil can win is for good men to do nothing.” When you’re barely making ends meet on a $12.00/hour salary, you’re certainly not going to raise questions when raising those questions could cost you your job.

    Well, guess what? Thousands of Wells Fargo employees pulled the bystander effect and they lost their jobs anyway.

    Even if Stumpf and others at the top were fired by the board, they all would have left Wells Fargo with a golden parachute just like Carrie Tolstedt who was allowed to retire rather than be fired and lose that very same golden parachute. I’m sure she is laughing all the way to the proverbial bank.

    We are sending a very definite message to our youth that is it perfectly okay to cheat your way to the top….as long as you don’t get caught. And when you do get caught be sure to blame someone else.

    For goodness sake, don’t be accountable. That is not in style anymore in America.

    • BJ

      Didn’t the issue occur when she was there?

      • Anna

        “Warren was an early advocate for the creation of a new Consumer Financial Protection Bureau (CFPB). The bureau was established by the Dodd Frank Wall Street Reform and Consumer Protection Act signed into law by President Obama in July 2010. In September 2010, President Obama named Warren Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau to set up the new agency. While liberal groups and consumer advocacy groups pushed for Obama to formally nominate Warren as the agency’s
        director, Warren was strongly opposed by financial institutions and by Republican members of Congress who believed Warren would be an overly zealous regulator. Reportedly convinced that Warren could not win Senate confirmation as the bureau’s first director, Obama turned to former Ohio Attorney General, Richard Cordray and in January 2012, over the objections of Republican senators, appointed Cordray to the post in a recess appointment.”

        Wikipedia

        I thought she was head of the bureau but she wasn’t. All the more reason she should have been after her dressing down of Stumpf.

        • BJ

          >I thought she was head of the bureau but she wasn’t.

          me too