Imagine you’re a politician who received tens of thousands of dollars in recent years from a bank, and hundreds of thousands from a banking industry that wants to do away with new consumer protections. Then that bank is caught opening up millions of fake accounts without authorization. If you’re one of these bank-backed legislators, this huge scandal is apparently an opportunity to take shots at the federal regulator the banking industry has been trying to undermine since its creation.
This morning’s House Financial Services Committee hearing on the ongoing Wells Fargo debacle spent an awful lot of time on the Consumer Financial Protection Bureau, the agency that recently hit Wells with a $185 settlement over the mountain of bogus bank accounts, and which has been the target of pro-bank lawmakers since it was created as part of the 2010 financial reforms.
“We are here today because millions of Americans were ripped off by their bank and seemingly let down by their government,” said committee chair, Rep. Jeb Hensarling (TX). “If [the Office of the Comptroller of the Currency] had examiners on site at Wells Fargo during the time when fraudulent accounts were open and the Consumer Financial Protection Bureau was conducting regulator investigations, why did it take the Los Angeles Times to expose the fraud? And once exposed why did it take almost 18 months for the CFPB to initiate a supervisory review?”
Hensarling has been a vocal opponent of the CFPB, sponsoring multiple pieces of legislation to reshape the Bureau to be less efficient and put its budget directly under the control of Congress. He’s also, as Allied Progress points out, received more than $33,000 from Wells Fargo and its executives since 2011. According to OpenSecrets.org, Hensarling has taken in nearly half a million dollars from commercial banks and investment firms during the current election cycle alone.
Likewise, when Rep. Scott Garrett (NJ) commented that the “CPFB has one job and they blew it,” you have to wonder whether that’s his principles talking, or the $20,250 he’s received from Wells and its executives since 2011 (not to mention the more than $350,000 he’s received from banks and investment firms in the current election cycle).
In total, per the Allied Progress report, Wells Fargo and its execs have contributed more than $560,000 to around three dozen members of the Financial Services Committee — ranging from as little as $2,000 to Rep. Bruce Poliquin (ME) to as much as $55,700 for committee vice-chair Rep. Patrick McHenry (NC). Regardless of the amount contributed to these lawmakers, they all sponsored or co-sponsored at least one piece of legislation intended to gut the CFPB.
Thankfully, this morning’s hearing did also attempt to hold Wells Fargo accountable for its own bad behavior. Hensarling and other members of the Committee didn’t hold back when it came to grilling Stumpf on what he knew, when he knew it, and why action wasn’t taken.
Stumpf said that from 2011 to 2013 the board would get reports at a committee level about ethics line requests related to the issue, but maintained that he didn’t know about the fraudulent account openings until 2013, when it was growing in the California area. All that despite being the chairman of the Wells Fargo board.
New York Rep. Carolyn Maloney — who has received her fair share of contributions from the financial industries, but has not signed on to any legislation to gut the CFPB — questioned Wells Fargo’s knowledge of the fraudulent actions by employees, citing reports that workers brought the issues to light as far back as 2007.
“When you were asked if you would extend the review back to before 2009, you refused to commit to extending the review back even earlier,” she stated. “If you were presented with evidence that Wells was engaged in some of these same illegal practices prior to 2009, would that change your mind about extending the review?”
Once again, Stumpf said he would take the matter into consideration.
Maloney also questioned Stumpf’s action in the selling of $13 million in Wells Fargo stock in Oct. 2013, suggesting the sale was made because the CEO had become aware of the fraudulent account issues.
“It’s suspicious that this happened after your billion-dollar bank was turned into a school for scoundrels,” she said. “Did you dump $13 million worth of Wells Fargo stock on the open market after you found the bank had been fraudulently opening hundreds of thousands of scam accounts ripping off customers?”
Stumpf denied the allegations, noting that he currently holds four times as many shares in the bank than he is required.
When asked to classify what happened with the two million unauthorized accounts, Stumpf once again declined to say they were fraudulent or part of a scheme.
“I think it was dishonest, it broke our code of ethics,” he said.
That answer didn’t sit well with Wisconsin Rep. Sean Duffy ($23,000 from Wells and associates since 2011), who questioned why the bank didn’t take action sooner, and why it turned a blind eye.
“You have got to be kidding me. Board members knew in 2011, they were looking at this, and if they are looking at 1,000 people fired, and they don’t know why,” Duffy said. “If they pulled the curtain back, if you want to call defrauding customers or stealing, it’s obvious that Wells Fargo had a big problem.”
McHenry of North Carolina took Stumpf to task over his own accountability for the issues and how such fraudulent actions were allowed in the first place. Stumpf claimed in his opening statement that it was his idea to forfeit $41 million and go without salary during an internal investigation.
“You have clearly failed, you’ve clearly failed in your own ethical standards internally,” McHenry said after reading the bank’s code of ethics and business conduct, which states all employees, including executives, are required to follow the law. “You have broken, and your company has broken, long-standing laws and defrauded customers.”
Stumpf noted that the company’s customer service rates are the highest they have ever been and that the culture of the bank is worth being proud of.
“For you to say the culture is okay is telling me you’re tone deaf,” McHenry countered. “The impact is not on your insinuation, but on the wider industry on how consumers access credit.”
As for what the bank is doing now, Stumpf reiterated that the company will undergo a full review of sales practices going back to 2009.
While the bank announced earlier this month that it would end sales goals by Jan. 2017, Stumpf said on Thursday that the date has been moved up to Oct. 1.
“We want to make sure that nothing stands in the way of our customers,” he said, noting that the bank is working on a new incentive program that will better compensate employees. It was unclear how this program would differ from sales goals.
Additionally, he says the bank has already begun reaching out to customers affected by the fraudulent accounts, noting that 20,000 credit card holders have already been contacted. So far, he claims 25% of those customers say they either didn’t want or don’t recall signing up for the credit cards.
To remedy the situation, the bank has closed accounts that customers do not want, notified the credit reporting bureaus, and refunded any fees incurred.
For deposit accounts, the bank is contacting customers to examine how they were affected.
“There’s no question that we’ve done things, and we’re working to make that right,” Stumpf said.
But when lawmakers compared the situation to someone robbing a Wells Fargo bank, Stumpf claimed that breaking the law was totally different.
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